Mon, 25 Sep 2000

Tax compliance needs improvement: Official

JAKARTA (JP): Only a little more than half of Indonesia's 1.3 million registered individual tax payers have fulfilled their tax obligation in full, according to a senior official at the office of the director general of taxation.

Director for tax education and information Nono Hanafi said on Saturday that out of the 1.3 million tax payers, only 70 percent submitted their tax forms, and only 60 percent actually paid the tax in full.

He said that improving tax compliance among the country's wage earners was crucial because tax revenues contributed around 60 percent of domestic revenues in the state budget.

Tax compliance will be even more crucial in the future as the government is determined to reduce foreign borrowing to create a healthy and credible state budget.

Tax revenues in the 1999/2000 fiscal year totaled Rp 97.4 trillion (US$11.45 billion) compared to Rp 87.7 trillion in fiscal year 1998/1999.

"It's not yet optimum because the number of registered tax payers was only 1.3 million out of the country's 220 million population," Nono said.

The House of Representatives approved late in July amendments to five tax laws which, among other things, aimed at improving tax compliance, broaden the tax base, and improve the efficiency of tax administration.

Tax officials said that the amendments were expected to help the government increase the number of registered tax payers to four million over the next five years.

Officials also said that the actual number of potential individual tax payers was about 20 million.

Director general of taxation Machfud Sidik recently lambasted the country's elite, including legislators, generals, and high- ranking government officials, for evading tax payments.

He said that these people received incomes outside their taxed salaries, which they did not declare to his office.

Machfud admitted that the government must improve public services otherwise people would be discouraged from paying taxes.

Former finance minister Bambang Sudibyo said last month that tax evasion in the country was a very serious problem, causing the government to lose trillions of rupiah a year in unpaid taxes.

He pointed out that in the 1999/2000 fiscal year, the amount of taxable income not reported to the tax authority was estimated at the alarming level of Rp 170 trillion compared to only Rp 27.7 trillion in the 1991/1992 fiscal year.

Bambang said that the amount of uncollected income tax in the 1999/2000 period was estimated at Rp 31.08 trillion compared to Rp 5.08 trillion in the 1991/1992 fiscal year.(rei)