Private schools, colleges offered tax concessions

JAKARTA (JP): The Ministry of Finance and private schools and colleges have finally come to a compromise over the new regulation requiring them to start paying income taxes.

Under the compromise formula, foundations that run education institutions are exempted from the income tax if the surplus revenues generated were spent on buildings, land and other facilities destined for the good of the education.

They must expend their surplus revenues within four years after the end of the fiscal year in which the revenues are acquired. Beyond that, the surplus is subject to income tax.

Director General of Tax Fuad Bawazier issued a new regulation on Oct. 10 on income taxes for education foundations.

The new regulation is the result of lengthy negotiations between the directorate general and the association of private college operators.

Most foundations that run schools and colleges have complained about the regulation, issued in April, that subjects them to income tax, saying that many of them could be forced into bankruptcy, or forced to raise their tuition and admission fees.

"The Ministry of Education and Culture and foundations running private schools welcome the new rule," Yayasan Bina Pembangunan, one of the foundations, announced yesterday.

In the meetings, Fuad explained that the imposition of tax on private schools is intended to "protect society from commercialization of education". The action was taken in response to public complaints over the high cost of education.

The new rule, he said, will clearly distinguish between non- profit foundations that really spend their income on education, and those suspected of simply reaping profits.

"This way, all income from foundations, which run schools will be returned to education," Fuad said.

Educators, representing the Council of Indonesian Private Higher Education Institutions and the Central Office of the Private Education Council, committed themselves to transparent management in return for the change in taxation. A clause that foundations are to deliver reports on their accounts to the local tax office is included in the rule.

Bun Yamin Ramto, the chairman of the Council of Indonesian Private Education Institutions, said earlier that managements of private education facilities welcomed the compromise. (anr)