Tax break facility welcomed, graft feared
Leony Aurora , The Jakarta Post/Jakarta
Economists praised the government's decision to provide tax breaks for companies donating aid to tsunami victims in Aceh and North Sumatra, but warned of the possibility of corruption.
The incentives should encourage more aid for the affected areas and benefit the government, the companies and most of all the victims, said Aviliani of the Institute for Development of Economics and Finance on Wednesday.
However, she stressed that clear mechanisms were needed to determine the incentives to avoid abuse.
"It is possible that somebody who donates Rp 1 billion (US$107,238) could claim to have donated Rp 5 billion," she said as an example.
The government issued a ministerial decree on Tuesday giving a tax cut to companies that donated part of their profits to victims of the tragedy.
To be eligible for the tax break, companies must obtain a receipt from the people or institutions that receive the donation and attach the receipt to their annual income tax bill.
Economist Chatib Basri, however, said concerns over possible corruption should not keep donations from getting to people who need help.
"(The possibility of corruption) is unavoidable. However, we should still try to implement the incentives," he said.
After the 2002 bombings in Bali decimated the island's tourist industry, the government waived income taxes for companies on the island for a year.
Meanwhile, Nina Sapti Triaswati, an economist at the University of Indonesia, said the government should expand the tax breaks to cover donations to victims of other natural disasters.
"The ministerial decree only applies to Aceh and North Sumatra. What about Alor? What about Nabire?" she said, referring to two regions recently affected by earthquakes.
A powerful quake measuring 6.4 on the Richter scale devastated the East Nusa Tenggara island of Alor on Nov. 12, killing more than 30 people, damaging about 17,000 buildings and leaving 50,000 people homeless.
In Nabire, Papua, a powerful earthquake took 32 lives and caused Rp 500 billion in material losses.
The number of victims in Aceh and North Sumatra has risen to more than 36,000 as more corpses are recovered from beneath the rubble and mud.
Nina said tax regulations should be standardized concerning the severity of natural disasters that qualify for tax benefits. In addition, she said, funds used for social activities such as education, research and development also should be deductible.
"Developed countries have such tax incentives," she said.
Chatib challenged her position by saying expanding the incentives too much would cut into state revenue.
Even before the Aceh tragedy, the government was in dire need of funds to plug the hole in this year's state budget.