Tax-related bills have loopholes, say experts

Tax-related bills have loopholes, say experts

JAKARTA (JP): The Center for Fiscal and Monetary Studies said
yesterday five tax-related bills being deliberated by the House
of Representatives still had weaknesses which needed to be
corrected.

The center said in its analysis on the five bills that the
bills' articles were simple enough for common people to
understand but such simplicity would open loopholes for tax
collectors and tax payers to exploit.

It also said the bills could even burden the people and
increase costs if they were not well enforced.

The five bills are on local taxes and levies, tax on the
transfer of land and buildings, tax collection with distress
warrants, tax courts and nontax revenue.

The bill on local tax and revenue, for instance, opened the
possibility of local administrations introducing new taxes and
levies which might be redundant and burden people, the center
said.

"The government is expected to improve efficiency in tax
collection and administration so collection and administration
costs do not exceed tax revenue," said Tribuana, one of the
center's executives.

He said taxes on billboards, hotels and restaurants, for
instance, could not yet be implemented in some areas because
their collections cost more than the revenue they raised.

In terms of entertainment taxes, Tribuana said the government
should not allow local administrations to impose such taxes for
traditional performances.

"Administrations should impose them on contemporary
performances but not the traditional ones. This way, we help
preserve our traditional shows," Tribuana said.

In terms of land water-usage taxes, he said local
administrations should exempt households.

He also said the bill on local taxes and levies should be
better divided into two: a bill on local taxes and a bill on
local levies.

Speaking on the bill on taxes on the transfer of land and
building, he said transfers worth less than Rp 60 million
(US$25,000) should be exempt.

Also the transfer of lands and buildings used for social
purposes should also be exempt from ownership transfer taxes,
Tribuana said.

Soemarso, another executive at the center said the bill on tax
collection with distress warrants should be adjusted with the
existing laws, especially the 1992 banking law, which upholds
bank secrecy.

Confiscating bank documents, for instance, was allowed by the
bill but not by the banking law, Soemarso said.

He warned that the bill neglected the tax payer's interests.
The bill allows tax officials to auction a tax payers' properties
to cover his unpaid taxes even though the tax payer is taking the
case to tax courts, he said.

On tax courts bill, Soemarso said it should stipulate clearly
that the judges must be totally independent. So officials should
not be allowed to sit on the panel of judges.

The bill should also create a mechanism so tax courts did not
give contradictory verdicts with one another, he said

Soemarso said the bill did not provide fair treatment for tax
payers.

Although the bill does not recognize appealing mechanisms, it
allows the government, but not tax payers, to appeal to the
Supreme Court if it loses a case in the tax court.

Tax payers are also required to pay the disputed amount before
their cases are heard by the court. "That's not fair. Why doesn't
the bill require tax payers to pay the disputed amount after the
court hands down its verdict."

Jaso Winarto, another executive at the center said the bill on
nontax revenue should give an exact time limit for departments
and state agencies to submit their nontax revenue to the state
treasury.

The five-year transition period given to departments and state
institutions to adjust their regulations in accordance with the
bill was too long, Jaso said.

"The ideal period should be between two and three years, so
that the next cabinet can work with the new bill," he said. (rid)