Tax revenue at risk due to economic crisis: Official
Tax revenue at risk due to economic crisis: Official
JAKARTA (JP): Director General of Taxation Effendi Ritonga
said on Wednesday that the 1998/1999 tax revenue target might not
be achieved due to massive demands for tax exemption in the wake
of the current economic crisis.
He said here that the revenue target from the value added tax
(VAT) was particularly at risk because the government had agreed
to provide exemption for the Batam industrial island and the
animal feed industry, and was considering a similar exemption for
port operators and for the purchase of airplanes and ships.
"We have to work extra hard to attain the VAT target because
we'll lose some of the VAT sources that we put into the previous
calculations," he told reporters after speaking at a seminar.
"I can't disclose the figure we have lost but the amount is
significant," he added.
He pointed out that the only strong sources of tax revenues
during the current difficult economic situation were from the
agribusiness sector and industries which were not dependent on
imported raw materials.
Effendi, however, said that at the end of October, income tax
revenue had already surpassed the Rp 26 trillion (US$3.5 billion)
target, helped by high bank interest rates on time deposits and
the sharp depreciation of the rupiah against the U.S. dollar
which resulted in higher tax payments from foreign exchange
activities.
He pointed out that the income tax revenue scenario was based
on an assumption of time deposit interest rates of 30 percent,
and an exchange rate of Rp 10,600 to the dollar.
Time deposit rates have been hovering around 50-60 percent,
while the rupiah's exchange rate reached more than Rp 14,000 in
June before stabilizing to around Rp 7,500 during the past couple
of months.
Revenue for the value added tax is set at Rp 29 trillion,
compared to the total tax and excise revenue of Rp 72.93 trillion
in the current fiscal year ending in March 1999.
Effendi said that tax revenues, at around 52 percent, remained
the dominant contributor to domestic revenue, although its
contribution to the overall state budget declined to 28 percent
due to rising overseas assistance.
He warned that a failure in achieving the tax revenue target
would result in the disruption of the government's routine
spending.
"There must not be any attempts to use the current crisis as
an excuse for not paying taxes, because if that happens where
will the government get the financing required for its routine
spending."
"Should we lower the salary of government employees, or will
we accept disorder in the supply of electricity?" he asked.
He said that various industries have asked the government to
provide value added tax exemptions due to the current economic
crisis.
They include the automotive, garment, entertainment, book
publishing, electronics and tourism industries.
He also explained that the government would have to forfeit
huge potential VAT revenues, particularly from the restructuring
of banking sector and private sector overseas debts, in order for
the restructuring programs to be successful.
As an example, he pointed out that the banking sector's bad
assets would likely be transferred to the Indonesian Bank
Restructuring Agency at zero value.
He added that companies receiving a debt haircut would likely
be allowed to spread the payment of their VATs over a five-year
period. Under the existing law, debt forgiveness is treated as
capital gain, which is subject to VAT. (rei)