House may slap taxes on BI to boost budget transparency

Aditya Suharmoko , The Jakarta Post , Jakarta | Mon, 06/23/2008 10:36 AM | Business

In a bid to increase its budget transparency, the central bank may have to pay income tax starting next year if it records a budget surplus, a further deliberation on the income tax bill reveals.

"Until now, only House Commission XI, which oversees Bank Indonesia's (BI) budget, has had access to BI's budget besides Bank Indonesia Supervisory Board (BSBI)," Dradjad H. Wibowo, a member of the House's working committee on the bill, said Sunday.

"Perhaps BI will be more transparent about its budget if it is subjected to tax."

Dradjad said the House and the government agreed to include a provision in the bill stipulating that BI would be taxed 30 percent in 2008 and 28 percent in 2009.

However, if BI suffers a budget deficit, it will not be subjected to tax.

The government and the House has reduced the income tax rate for institutions from the current 35 percent to 28 percent in 2009 to stimulate company expansion.

In the first quarter of 2008, BI recorded a budget surplus of Rp 2.22 trillion (US$238.71 million).

BI's budget is used to implement its monetary policy through, for example, the buying or selling of U.S. dollars and the adjustment of office expenses.

Despite the surplus, BI governor Boediono has said his office may use more money to intervene in the market to prevent the rupiah from plunging against the dollar amid the current unfavorable economic conditions.

Last year, BI suffered a budget deficit of Rp 1.4 trillion, a drop from a total surplus of Rp 31.01 trillion in 2006 through its monetary policy and inflation targeting operations.

Dradjad said that if BI was subjected to tax, it would be more careful in implementing its monetary policy.

As of May, BI's foreign reserves stood at $57.46 billion, increasing from $56.92 billion at the end of 2007. BI predicted its foreign reserves to reach $69.02 billion by the end of 2008.

Dradjad said the directorate general of taxation needed to protect BI's data to prevent such secretive information from being leaked.

More specific details on the regulation will be deliberated in upcoming sessions.

Another member of the House's working committee on the income tax bill, Rama Pratama, said the House expected to wrap up the bill in July.

"The bill can be implemented on Jan. 1, 2009," he said.

The latest deliberation on the bill also concluded that micro-, small- and medium-sized enterprises (MSMEs) without a proper accounting systems will be subjected to a 0.75 percent tax on their annual gross revenue, down from the current 2 percent.

A 15 percent profit tax will be imposed on MSMEs with proper accounting systems, down from the current range of rates that could reach up to 30 percent, to encourage MSMEs to use a proper accounting system.

The taxes, however, will be subjected only to MSMEs with an annual gross revenue below Rp 5 billion (US$537,634), a rise from Rp 1.8 billion currently.

Under the newly endorsed law on MSMEs micro-businesses are defined as those having assets below Rp 50 million and annual gross revenues below Rp 300 million, and small businesses have assets between Rp 50 million and Rp 500 million, and revenues between Rp 300 million and Rp 2.5 billion.

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