Objection to VAT hike

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