Sutiyoso bows under pressure over fuel tax

JAKARTA (JP): Governor Sutiyoso buckled under pressure yesterday over his unpopular plan to impose a 5 percent tax on fuels, which have risen up to 71 percent.

He announced that the plan would be shelved "until the country's economic condition allowed" the city administration to introduce such a policy.

The administration put off the controversial plan following strong opposition from the City Council, which argued that introduction of the policy would only add to the social tension which was heightened by the hike in fuel and power tariffs last week.

"I used my authority to postpone the implementation of the (additional) fuel tax. I see that it is impossible to put the policy into effect now due to the economic turmoil."

He noted that people's purchasing power was low during the economic crisis and therefore it was not the right time to introduce the policy.

"I will review the policy when the economic condition improves," he said.

The debate over the tax erupted last week after the City Council vowed they would reject the 5 percent tax if it was not already included in the fuel price increases announced by the central government.

The introduction of the fuel tax was originally designed to compensate for a downturn in revenues from the enactment of Law No. 18/1997 on the collection of local taxes and levies starting on May 23.

Based on the law, the number of local taxes will be cut from 42 categories to only nine, and the number of levies from 192 categories to 30.

The Jakarta administration's revenues are currently derived from 13 different taxes and 44 different levies.

But there is confusion among city officials about whether the 71 percent increase has already included the 5 percent tax that will go to the local administration.

The city secretary, Fauzi Bowo, said yesterday that the central government was yet to explain the matter to the city administration.

"The government's directive to regional administrations is vague. We do not want to add to the burden of the people," he said.

"We understand (to introduce the fuel tax) is the government's authority but we are aware the administration has a responsibility not to burden people."

The government increased fuel prices last week by between 25 percent and 71.43 percent, and electricity tariffs by 20 percent to reduce subsidies and curb the state budget deficit.

The price of kerosene, the fuel most widely used by low-income families, experienced the smallest increase of 25 percent to Rp 350 per liter. The price of gasoline increased by more than 71 percent to Rp 1,200. (ind)