On tax stimulus

I am writing in response to the article by David Sumual on Aug. 26 on the need for a tax stimulus to create new investment and higher economic growth for Indonesia.

While in principle, I agree with Sumual's argument, I think his tax stimulus proposal does not go far enough. Companies in Indonesia are hit by one of the highest corporate income taxes in the Southeast Asian region, at 28 percent per annum. In addition, they have to pay various other user charges imposed by central and local governments, both official and unofficial.

I do not think Sumual's proposal for a 10 percent investment tax stimulus and a decrease in excise duty for the importation of machinery would be effective in jump-starting new investment in Indonesia, since the proposed tax stimulus is far less than the overall tax rates companies have to pay to government officials.

In addition, only manufacturing firms would benefit from this tax stimulus, leaving the agriculture and service industries with no economic stimulus whatsoever.

As an alternative, I would propose that Indonesia impose a single, flat-rate corporate income tax no higher than 15 percent per annum. This would bring Indonesia's corporate income tax on a par with the level charged by our competitors, such as South Korea, Hong Kong and Malaysia, thereby attracting more foreign direct investment to Indonesia.

Finally, I would call for the abolishment of most user charges imposed by central and local governments on businesses, and for an overhaul of our legal system to eradicate the corruption endemic to this country.

With these changes, the barriers to investment in Indonesia would be eliminated and hopefully, a high and sustainable economic growth could be generated, which would improve the fortunes of all Indonesians.

ALEX ARIFIANTO, Jakarta