Support grows but questions remain on wealth tax decree

JAKARTA (JP): Businesspeople, legislators and analysts have come out in support of President Soeharto's decree that rich people pay 2 percent of their after-tax incomes to help the poor, but wonder how the government will implement it.

Iman Taufik, a businessman and executive at the Indonesian Chamber of Commerce and Industry, said all businesspeople should support the government's poverty-alleviation programs because it was their obligation to help poor brothers.

"All members of the chamber will support it because poor and very poor families need our help. If not us, who else," Iman said.

More than 25 million people live below the official poverty line.

Directorate General of Taxes issued a letter yesterday to explain the decree. The letter states that individuals and companies with net annual earnings over Rp 100 million must donate 2 percent of their net incomes. The order is effective for this fiscal year.

He said eligible taxpayers must transfer their donations directly to Yayasan Dana Sejahtera Mandiri foundation's account at the Harmoni, Jakarta, branch of state-owned Bank Negara Indonesia 1946. The account number is 0850801.001.

Taxpayers will be required to submit a copy of transfer documents to their nearest tax office.

Arifin Panigoro, the chairman of publicly listed oil firm PT Medco Energy, welcomed the move, saying it would help the government alleviate poverty.

"It's good: 2 percent is very small. Just consider it as more income tax," Arifin said.

Arifin believed the 2 percent surcharge would not discourage foreign investors, saying other countries imposed income taxes up to 60 percent.

State Minister of National Development Planning Ginandjar Kartasasmita agreed the surcharge would not affect business.

"I believe it. As long as you manage it transparently, it would be no problem for business," Ginandjar said.

President Soeharto, in a similar decree issued in December last year, asked rich people to donate 2 percent of their after- tax income to help the poor.

Soeharto asked the country's wealthy in September this year why only half of those qualifying for donations had ignored his appeal.

The government has pursued several poverty-alleviation programs, including loans to poor families. State Minister of Population Haryono Suyono oversees this program.

Haryono said recently Rp 1.15 trillion was needed for his program which would loan each poor family Rp 100,000 at 6 percent annual interest.

The government said 15 million poor families qualified for the loans.

Unlike government aid to poor villages which is recorded in the state budget, these loans are not.

Legislator Hamzah Haz of the United Development Party said the surcharge funds should be included as state revenue in the budget. Only then should the foundation distribute it.

"This way, the foundation could be considered a tool for disseminating the funds to the poor," Hamzah said.

Aberson M. Sihaloho of the Indonesian Democratic Party said the government should increase the top income tax rate of 30 percent to 32 percent rather than introduce this ruling.

"If it is imperative the funds go to the state as taxes instead of to the foundation," Aberson said.

Economist Didik J. Rachbini agreed the government should manage public funds transparently: "This means the manager of the funds must be accountable to the public."

While it was not immediately clear how the new decree would be enforced, economist Christianto Wibisono said he expected most local taxpayers would comply voluntarily.

"Most locals will comply, only the multinationals will argue. People say it is better not to argue with the government because you would be considered opposition. This has become a political issue and you would be considered disloyal," he said. (rid/pwn)