Tax regime should be simple, certain and competitive

Tax regime should be simple, certain and competitive

Urip Hudiono, The Jakarta Post, Jakarta

Tax legislation should be "simple, certain and competitive,"
prominent economists and former finance ministers suggest if the
government hopes to generate more tax revenues and stimulate
economic growth.

"An effective tax regime is in essence one that reflects the
aspects of simplicity and certainty, as well as one that can
enhance a country's competitiveness," Ali Wardhana said during a
hearing on Monday with the House of Representatives committee
discussing the government's proposed amendments to the existing
tax legislation.

Ali, who served three terms as finance minister from 1968 to
1983, explained that simplicity meant that tax assessment and
payment procedures must be made as easy and convenient as
possible for taxpayers.

"Individual taxpayers should be the main consideration here,"
he said. "If they have to fill out forms that are too
complicated, then they will, of course, be reluctant, when all
they want to know is how much taxes they owe and how to pay
them."

Continuing its deliberation of the bills, the House had
invited former finance ministers Ali Wardhana, J.B. Sumarlin and
Fuad Bawazier to voice their opinions on the country's planned
third major tax reform since 1983.

Also invited were Frans Seda, Mar'ie Muhammad and Bambang
Sudibyo, who were unable to attend the hearing.

Simplicity, Ali continued, also meant reducing the number of
taxes in the country, which at present stood at around 50,
compared to half that number in Malaysia and Thailand.

"We also have to cut the time spent on dealing with taxes,
which is still 560 hours according to a (World Bank) study," he
said.

On the aspect of certainty and competitiveness, Ali stressed
their importance as taxes affected investors, who demanded legal
certainty and efficiency for their long-term business plans.

Still concerning certainty, Ali also mentioned the need for
clear rules and an independent institution to resolve any
disputes between taxpayers and tax officials.

"The problem in the current amendment bills is that the
taxpayers can only object to a unit of the finance ministry,
whose its independence is doubtful," he said. "It is also vaguely
stated that the finance ministry 'may' form such a unit, when we
need certainty that such an institution will indeed exist."

Meanwhile, Sumarlin, who served as finance minister from 1988
to 1993, was cautious about increasing the powers of tax
officials without tight monitoring and control.

"Increasing the powers of tax officials must also be done
prudently as this could lead to abuses of power, which would also
be unfavorable for the business and investment climate."

Expanding the tax base also needed to be carried out carefully
through, for instance, imposing taxes on intangible assets like
bandwidths widely used by the telecommunications industry.

"We have to prevent such taxes from being passed on and
becoming components of the high-cost economy," said Sumarlin.