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)