Soeharto wants all local levies stopped
Soeharto wants all local levies stopped
JAKARTA (JP): President Soeharto ordered Minister of Home
Affairs R. Hartono yesterday to ensure that all business levies
imposed by provincial, regency and city administrations be
abolished immediately.
Hartono, speaking to the media after meeting with the
President at the Bina Graha presidential office, said teams from
the ministry would be sent to the regions periodically to ensure
compliance.
An end to all business levies at local government levels is
one of several pledges by the government in its latest economic
reform package, drawn up with the International Monetary Fund and
announced last week.
The Ministry of Home Affairs is empowered to take punitive
action against delinquent administrations, Hartono said. He did
not elaborate on the sanctions.
Levies, legitimate and otherwise, have been a major source of
complaints for many businesses, as they increased business
expenses and undermined overall competitiveness.
The central government frequently promised to reduce the
number of levies, but its efforts were met strong bureaucratic
resistance. Many local administrations have relied on levies to
bolster their revenues.
Hartono said local administrations would soon be allowed to
impose a 5 percent local tax on sales of gasoline to replace the
levies.
They should also collect more income from the higher tax rates
on the transfer of property titles beginning April 1. All
property tax revenues would also be retained by the local
administration beginning this fiscal year.
The government has yet to announce when the new 5 percent
gasoline tax, originally scheduled for April 1, will take effect.
Hartono conceded the end to the business levies would mean
lower revenues for local administrations.
The move has already forced many local administrations to
slash their budget plans for this year.
The Jakarta city administration announced yesterday it was
scaling down its spending in this fiscal year by a further 35
percent, from Rp 2.8 trillion to Rp 1.8 trillion.
The regency office in Dili, the capital of East Timor, said
many city administrations could not operate if they were to rely
solely on locally generated tax revenues and central government
subsidies.
Anthonio Castro, the regency's director of local companies,
said the abolition of business levies would be particularly tough
for administrations in poor provinces like East Timor and East
Nusa Tenggara, Antara reported.
Richer provinces like Bali and those in Sumatra and Kalimantan
would experience few effects, he said.
Castro warned that local administrations would become even
more dependent on central government subsidies to finance their
development programs. (byg)