President Calls for Tax Improvement

JAKARTA: President Susilo Bambang Yudhoyono asks Coordinating Minister for Economic Affairs Hatta Rajasa to improve taxation policies to bolster investments. Taxation regulations, states the President, have to be in sync with the government's pro-poor,
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News Editor - Bisnis.com 24 Desember 2010  |  04:18 WIB

JAKARTA: President Susilo Bambang Yudhoyono asks Coordinating Minister for Economic Affairs Hatta Rajasa to improve taxation policies to bolster investments. Taxation regulations, states the President, have to be in sync with the government's pro-poor, pro-job, pro-growth, and pro-environment policies. They should also create business certainty for the business industry and leave no gray area for moral hazard. "Let's improve our taxation policies to create good investment climate and certainty. We want to attain optimal taxation and minimize distortion," he told a plenary cabinet meeting attended by all ministers and minister-level officials in the Presidential Palace yesterday. He said if taxation policies could create favorable business climate they would be able to bolster tax revenues from business activities. Therefore, the President asked the Coordinating Minister for Economic Affairs to avoid ministerial decrees and the Directorate General of Taxation Decision Letters from being multi-interpretable. "Often, tax cases tried at taxation courts fail to come up with rulings that satisfy the people. I want us to evaluate down to ministerial decrees to prevent them from being multi-interpretable."He added business sectors inflicting serious environmental damages could be imposed by bigger taxes. The President continued there had been complaints from the industry about the high tax applied to the shipyard business, making it difficult for the sector to be competitive. Hatta Rajasa said there were 13 kinds of taxes that had to be improved. "I will discuss them with the Minister of Trade, the Minister of Industry, and the Head of the Investment Coordinating Board (BKPM). After that, we will report the matter to Vice President Boediono." He cited that the 13 kinds of tax problems are, among others, taxation incentives and disincentives, restitution, and contradicting regulations. "So, starting December 28, I will hold a series of meetings to settle the issues." For example, the government would evaluate the tax restitution policy on the oil palm industry, which interrupted the limited liability business group. The government would also evaluate why VATs were imposed on ship and train products manufactured locally, but not on imported products. "Such a condition prompts the business industry to import boats." He added that the domestic cocoa industry was charged with VAT on their raw material purchase, while raw export cocoa was not charged with export duty, prompting the business industry to build cocoa plants overseas and import raw materials from Indonesia. He also cited complaints from the national cinema industry. "The industry, for example, complains about the application of VAT to the transfer of video recordings to film negative. On the other hand, the elimination of such a VAT can actually stimulate the cinema industry and create jobs." Hatta asserted all taxation policy revisions had to be approved by the President. "In principle, we have to report [all taxation policies] to the President since the President clearly states that taxation matters should be reported to him." Chairperson of the Indonesian Employers Association (Apindo) Sofjan Wanandi welcomed the policy as long as it could be effective and would not complicate the chain of bureaucracy. "We'll see the implementation since it may instead curb things," he said. Sofjan questioned whether the President had sufficient time to receive reports and approved all taxation policy changes. "The President has too many tasks at hand. If all taxation policies down to the directorate general have to be reported to the President, can we guarantee there won't be bottleneck? I think it will suffice to have the policies only reported to the Minister of Finance, who once in a while reports to the President." Double-edged swordThe Institute for Development of Economics and Finance Indonesia (Indef) in the 2011 Indonesian Economic Projection launched yesterday considered tax instrument a double-edged sword that might be counter-productive to the economy.Inappropriate high tax burdens through tax extension and intensification would kill the business industry, which later would not be able to make tax payment contribution. "On the other hand, if the government is able to provide taxation facilities to incentivize the industry, it will bolster tax revenues in the long run," read the outlook report.Therefore, the government is asked to calculate thoroughly tax incentives for potential businesses that have huge added value and job creation. An economist at Sustainable Development Indonesia Dradjad Hari Wibowo disclosed the Directorate General of Taxation in several cases often acted unfairly to taxpayers. "In some cases, the business industry feels being overtaxed and afraid of the huge power of the Directorate General of Taxation. Referring to the Supreme Audit Body [BPK] resume of the performance of the Directorate General of Taxation, the worry is reasonable." The audit by the BPK finds many procedure violations in the taxation investigations conducted into six companies, leading the state to potentially lose IDR1.3 trillion. "Here, Minister of Finance Agus Martowardojo needs to evaluate whether hard power, which can lead to abuse of power, is more effective than soft power," said the former lawmaker at the House Commission XI. (NOM)

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