Objection to VAT hike

It is reported that the government is planning to raise value- added tax (VAT) from 10 percent to 12.5 percent as of July 1, 2001.

I strongly object to this idea. The 10 percent VAT currently imposed is already a heavy burden on the people. There has been no transparent calculation regarding input VAT per taxable income category and national input average since 1983. The effective tariff for a national average of 6 percent is considered significant.

Please compare VAT in Indonesia with similar tax in other countries. Japan only collects 3 percent of retail sales as does Singapore. Malaysia charges 5 percent but based on wholesales which can still be deducted from sales tax on goods. The USA imposes 7 percent of retail sales on end consumers.

If the government plans to impose a 2.50 percent hike in VAT on general tariffs, it will be the general public that will eventually bear all burdens. The government should be very prudent in making decisions related to public interests in general. But if the government has no other choice, they should raise tax only on goods and services enjoyed by the rich.

In my observation, the present operation of tax collection is neither fair nor comprehensive. There are still a lot of businesspeople who either have not paid tax or have not paid fully.

Collaboration between tax officers and business people has resulted in a loss in tax input. It is much better to straighten out this practice rather than to raise VAT.

The House members should be alert and cautious when deliberating the issue of the VAT hike to be proposed by the government. The government should not indulge itself in thinking that by raising the VAT by 2.5 percent, the state's income would increase by 25 percent. It does not necessarily work that way.

SUHARSONO HADIKUSUMO

Jakarta