Progressive car taxation system to be revoked

Progressive car taxation system to be revoked

JAKARTA (JP): City residents and companies who own more than
one vehicle will soon no longer have to pay tax on them at rates
of between 20 percent and 100 percent higher than the standard
vehicle tax rates.

The three-year-old progressive vehicle taxation system is to
be revoked from Apr. 1 as the administration has found it an
ineffective way to increase local tax revenue, city councilor
Amarullah Asbah said yesterday.

The proposed regulation to revoke the system, still being
revised jointly by the City Council and the administration, is
expected to be ready by March.

"With the completion of the new regulation, we will revoke the
system beginning April 1 this year," he said.

Amarullah, who is head of Commission C for finance affairs,
said the progressive car taxation system had many loopholes that
had been manipulated by those who owned more than one car.

"Since the implementation of the rules three years ago, many
parties who owned more than one car manipulated the rules by
using, for example, the names of their relatives for their
additional vehicles so they could avoid paying the tax.

We, therefore, considered that the progressive system has not
worked as well as expected," he said.

Under City Bylaw No.4/1994, which was approved by the City
Council in July 1994 and became effective on April 1, 1995,
vehicle owners are required to pay 120 percent of the tax rate
for a second vehicle, 140 percent for the third, 160 percent for
the fourth, 180 percent for the fifth and 200 percent for the
sixth and subsequent vehicles.

The progressive car taxation system was originally designed to
increase the city's revenue and to slow the growth in the number
of private cars as a way to solve the capital's burgeoning
traffic problems.

However, after three years of implementation, there has been
no significant change in the capital's traffic congestion.

The number of vehicles currently clogging the city is 2.79
million.

The progressive tax policy sparked controversy three years
ago, as many people said that it would be meaningless because
most rich people (who owned cars) would always find loopholes in
the regulations and try to break the law.

The tax is also considered a burden on middle class people, as
it affects them too.

Amarullah estimated the city's revenue from tax on motorized
vehicles and the first transfer of vehicle ownership (BBN-KB) in
the ongoing 1997/1998 fiscal year would amount to some Rp 197.4
billion (US$13.16 million), which is about 11.5 percent of
Jakarta's total revenue.

He gave no figures for the previous fiscal year in which the
city's total revenue was Rp 2.8 trillion.

Once the progressive vehicle taxation is eased, the tax will
be lowered from 5 percent to 1.5 percent of the price of the car
and the tax on vehicle ownership transfer (for the second owner)
will be lowered from five percent to only 1 percent, he said.

"The progressive tax is only effective for new cars ... but
actually the biggest section of the car market is for second-hand
cars. So hopefully this new revision will encourage people to
process the documents using their own names and, therefore, the
city will receive more money," he said.

"Lets hope that the revision will do a lot of good for the
residents and the municipality," he added. (edt)