Time to abolish departure tax

Time to abolish departure tax

By Martin R. Jenkins

JAKARTA (JP): When the New Order administration was swept away
in such spectacular fashion in last year's elections, many had
high hopes that the country would finally break away from the
past and that the new government would instigate real reforms.

The inward looking, paranoid and protectionist mentality of
the former regime was supposedly going to give way to democratic,
open-minded and rational thinking. Unfortunately, this has not
proven to be the case.

One of the legacies of the New Order is departure tax. The
tax, which now amounts to a hefty Rp 1 million (about US$115), is
imposed on all outgoing residents including foreigners who have
lived in Indonesia for six months or more (on business or social-
culture visas) or on a temporary residence visa (KITAS).

Only those with special status such as members of the
diplomatic corps, government officials traveling on official
business, and members of sports and cultural missions remain
exempt from paying the tax.

Although there is no fun in paying any type of tax, the
departure tax must rate as one the most absurd, unfair and
irrational taxes there is.

First of all, it is not really a tax at all, but more of a
punitive charge designed to prevent overseas travel. The high
level of the tax makes sure that only those who can really afford
it travel abroad. But why should this be so?

Is it really fair for the government to deny less wealthy
Indonesians the opportunity to visit neighboring countries such
as Singapore, Malaysia or Thailand, while the rich (for whom the
tax is just a drop in the ocean) jet off to more distant
countries, such as the United States?

As the tax is fixed, the cost of travel to neighboring
countries is massively increased -- in fact, for a trip to
Singapore the amount of the tax is actually higher than a
discounted Jakarta-Singapore return air ticket.

For journeys to more distant countries, however, the departure
tax represents a much smaller proportion of the overall traveling
costs. What a ridiculous state of affairs!

Second, the tax is brazenly unjust. Why should Indonesia
discourage its citizens from visiting other countries but at the
same time encourage citizens from those nations to come here?

What outrageous hypocrisy! Unless the government scraps the
departure tax, it would only be right for the governments of
other countries -- especially Indonesia's neighbors -- to
discourage their citizens from coming here too.

Although previous administrations have claimed that a
departure tax was necessary for "economic reasons", there is
still no justification in imposing an unjust tax. If the
government wishes to raise taxes then it should do so in a fair
manner and not through a tax that penalizes the less wealthy at
the expense of the rich.

In fact, the tax does far more harm than good on economic
grounds. In addition to discouraging Indonesians from going
overseas for holidays, the tax also discourages small-scale
businesspeople from doing business overseas and making vital
contracts with potential foreign business partners.

Worst of all, Indonesians are denied the opportunity of
experiencing foreign cultures at first hand and learning how
business practices work in other countries.

Ironically, the authorities claim that the departure tax can
be credited against payment of personal or corporate taxes due to
the government; yet it is virtually impossible to do so given the
red tape involved.

So, if the departure tax is just an "advance payment of tax",
why doesn't the government improve the system for collecting
income taxes and spare its unfortunate citizens from being taxed
at the airport?

It should also be appreciated that there are already effective
deterrents in place to curtail overseas travel. These include the
high costs of passports and the limits placed on the amount of
rupiah and foreign exchange that Indonesian travelers can take
abroad.

Moreover, domestic tourist destinations are far more
attractive than foreign ones given the massive depreciation of
the rupiah and the nation's large number of idyllic tourist
locations such as Bali.

In short, the departure tax is ineffective and unjust. It is
just the sort of tax that one would expect to have to pay in an
inward-looking, communist dictatorship and not a fledging
democracy preparing for an era of free trade like Indonesia.

The writer is a consultant at an Indonesian company in Jakarta.