Tax deduction urged to prop up CSR

Tax deduction urged to prop up CSR

The Jakarta Post, Jakarta

Despite an old dictum that gifts should be made without ulterior
motives in mind, businesspeople and activists have reiterated
calls for the government to offer tax deductions to lure
companies to fulfill their social responsibility.

"The government should start introducing tax deductions as an
incentive to businesses to meet their CSR (corporate social
responsibility)," said Niken Rahmad, the head of corporate
communications of Indonesia's largest cigarette maker PT H.M.
Sampoerna on the sidelines of a discussion organized by Trisakti
University on Wednesday.

However, Niken stressed that the basic intention of business
establishments in fulfilling their CSR should not be for the sake
of the incentives, but rather a recognition of the need to
empower local communities in every possible aspect.

She said the government should design a clear set of
regulations on the issue, including simpler bureaucratic
procedures, to support businesses. "We have faced minor but
nevertheless encumbering problems in obtaining permits to conduct
our social work," she said.

The founder of philanthropic fund manager Dompet Dhuafa
Republika, Parni Hadi, supported the idea, underlining that
whatever benefits are gained from such measures, be it through
incentives, promotion or recognition, they should not be the
primary motivation to carry out social activities.

The move to give tax incentives to companies to support their
social activities is common in several Asian countries, such as
the Philippines, as well as in developed nations like the United
States and Britain.

In Manila, the Philippine Business for Social Progress, an
independent organization providing CSR consultancy, has developed
a self-taxation system for companies by setting aside 1 percent
of their net profit for social development projects.

The United States and Britain, for their part, have
implemented a Socially Responsible Investment (SRI) scheme,
offering incentives to investors who sustain a triple bottom line
-- economic, social and environmental -- scenario for their
businesses.

Currently, some 12 percent of the investment funds in the
United States are managed under the SRI scheme.

On the world forum, stakeholders supported by the United
Nations have developed the Global Reporting Initiative, which
provides a set of guidelines on how to report the performance of
a company in terms of social and environmental issues.

The Office of the State Minister for the Environment has
introduced a similar system known as Sustainability Reporting
earlier this year, which could be used as a basis for
implementing tax deductions to develop CSR.

Support also came from the Indonesian Consumers Foundation
(YLKI) chairwoman Indah Suksmaningsih, who said the tax deduction
measure could provide an alternative channel to fund community
development programs.

"The latest survey by YLKI shows that 41 percent of our
respondents question whether tax-generated incomes were actually
used for development," she added.

However, giving tax breaks for companies carrying out social
activities should be done carefully as the possibility of abusing
tax regulations in Indonesia is still high, sociologist Imam B.
Prasodjo said earlier.

"The government should start by giving tax incentives to
companies that have carried out their social responsibilities
properly and are recognized as good taxpayers," he said. "It is
like saying, 'as a good citizen you are qualified for a tax
break'".

Imam suggested that the government set up an independent team
to help companies implement their social activities and to survey
how effective the funds are in developing sustainable economic
growth in the community.

"Introducing tax incentives should not raise any new problems,
so appropriate administrative and field audits of the companies
are necessary," he added. "A better system of taxation must be
prepared beforehand to avoid losses resulting from the
incentives." (003)