Rp 1 trillion per day

Rp 1 trillion per day

The 2003 state budget draft submitted to the House of Representatives last Friday sets tax receipts at Rp 260.8 trillion, or Rp 1 trillion each working day, a huge amount indeed given that the economic crisis still persists.

By setting the tax target high, the government seems to be encouraging the House to fight for this rise in tax receipts because Indonesia's tax ratio is the lowest in ASEAN, 13 percent this fiscal year and 13.3 percent in 2003.

Many countries make a tax ratio a guideline to assess the performance of the government or fiscal authorities in tax collection, but this method may be misleading. A low tax ratio does not mean a low burden on the part of the community.

As Indonesia's economy is characteristically dominated by the informal sector, some people may have a relatively big income but pay no taxes because they are in the informal sector, while others working in the formal sector must pay taxes even though their earnings are just above the untaxable income level.

It is true that Indonesia has about 1.9 million individual taxpayers and one million corporate taxpayers, but only about 50 percent of them send in their annual tax returns. More than half of this group states a zero condition or reports losses.

This means that tax receipts come from a certain number of taxpayers only. Under such a condition, the state budget becomes shaky.

The Directorate General of Tax's hard work to collect taxes may justify making taxes the main support of our state budget. In 2003, for example, 79.5 percent of the revenue will come from taxes. Under such a condition, will the state budget remain sound? In advanced countries, taxes generally make up only 50 percent to 60 percent of domestic revenue.

-- Bisnis Indonesia, Jakarta