Tax chief urges next govt to speed up tax bill deliberation

Rendi A. Witular, Jakarta

In order to expedite reform in the country's taxation system and administration, the next government and new member of the House of Representatives should quickly finalize and deliberate the draft revision of tax laws, tax chief said.

Director General of Taxation Hadi Purnomo said the draft tax laws would become the pivotal point for the tax directorate to be able to fully reform itself so that the state could gain maximum revenue from taxes.

"The draft tax laws will become the legal basis for the tax directorate to reform itself. I think that should be prioritized by the next government," said Hadi after attending a hearing with the Constitutional Court on Thursday.

The draft laws will include efforts to expand the number of new taxpayers by simplifying administration processes, and encouraging people to obtain their registered tax numbers.

The Directorate General of Taxation, which falls under the auspices of the Ministry of Finance, has drafted amendments to three tax laws: Law No. 16/2000 on general taxation arrangements and procedures, Law No. 17/2000 on income tax, and Law No. 18/2000 on value-added tax on goods and services, and luxury sales tax.

Based on the government's so called "White Paper" document, the draft tax laws are supposed to be completed by the government and submitted to the House for deliberation early this year, in order to be ready for implementation early next year.

The white paper consists of a series of key reform programs promised by the government after the termination of International Monetary Fund-sponsored reform programs late last year.

The outcome of the draft laws remain uncertain until now, as the outgoing President Megawati Soekarnoputri has thus far refused to approve them for deliberation by the House.

The Ministry of Finance has earlier projected that with the implementation of the new tax laws, revenue from taxes is expected to increase in average by Rp 30 trillion (US$3.33 billion) per annum from the current Rp 20 trillion.

However, according to the ministry, there will be a potential loss of at least Rp 4 trillion during the enforcement of the law in the first year, due primarily from the reduction of income tax for corporations and institutions to a flat rate of 28 percent, from the current maximum rate of 32 percent.

Other losses may result from the income tax adjustment for individuals, which will exempt people with a certain level of income from income tax.

"The draft laws provide incentives to help support the business community. Eventually, with the sprawling business activities, the state can reap in more tax revenues from more companies," said Hadi.

The 2005 draft budget projects revenues from taxes, including excise and import duties, to increase by only 9.3 percent, or Rp 25.3 trillion (US$2.81 billion), to Rp 297.5 trillion from Rp 272.2 trillion last year.

The target is moderate, considering that tax revenues have increased by an average 14.2 percent per annum over the past three years.

Eyebox

Businessman files tax complaint

Businessman Marto Sumartono, president director of property firm PT Mustika Lodan, files a complaint with the Constitutional Court, requesting the court to review Law No. 20/2000 on property transfer duty.

Marto said the content of the law was against the 1945 Constitution's Article 28d on equality in front of the law for every citizen.

"I request the court to review the law since it is considered unfavorable to the business community," said Marto during a hearing on Thursday.

The Court adjourned the hearing until both disputed parties submitted their written reports to the Court for further study.

The case against the tax office is the second case filed by a businessman. The first case filed was on the request to revoke Law No. 14/2002 on Tax Tribunal, which until now was still being processed by the Court. -- JP