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House wants higher tax target
Members of the House of Representatives on Tuesday demanded the government raise tax revenue targets in the proposed 2011 state budget, saying the current target was too low
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embers of the House of Representatives on Tuesday demanded the government raise tax revenue targets in the proposed 2011 state budget, saying the current target was too low.
The government expects to receive Rp 839.5 trillion in tax revenues in 2011, or about 12 percent of the country’s GDP, which is estimated to reach Rp 7,000 trillion (US$777 billion) next year.
But legislators said the tax revenue target was still too low although its ratio to GDP increased to 12 percent from the current 11.9 percent.
“Although the tax ratio looks small, the nominal increase in the total tax revenues is significant,” Finance Minister Agus Martowardojo said Tuesday after a plenary meeting at the House.
In its Financial Note, the government is targeting tax revenues of Rp 839.5 trillion in 2011, a 12.9 percent increase from Rp 743.3 trillion in its revised 2010 budget. Agus argued that the tax-to-GDP ratio in the 2011 state budget would reach 14 percent if regional tax revenues were included.
In Indonesia, he said, the tax–to-GDP ratio was calculated based on central government tax revenues, while tax revenues collected by regional administrations were not included.
Prosperous Justice Party (PKS) legislator Ecky Awal Mucharam said the government should increase its targeted tax–to-GDP ratio to at least 13 percent in 2011. “A 13 percent tax–to-GDP ratio is achievable if the government can eradicate tax fraud,” he said.
Laurens Bahang Dama from the National Mandate Party (PAN) said he believed the government could boost its tax-to-GDP ratio to 13 percent through extending and intensifying tax collection.
“It is possible to increase tax revenues given the fact that the country’s tax ratio is still the lowest among Asian countries,” he said.
Utut Adianto from the Indonesian Democratic Party of Struggle (PDI-P) said a 12.5 percent tax ratio was more realistic.
To obtain higher tax revenues, Agus said the government would place more focus on exploring new sources of tax revenue.
“We will continue our bureaucracy reform, improve regulations and increase the potential of tax
income,” he said, adding that the government provided tax incentives to improve compliance with tax laws.
The government, he said, should improve tax control so tax fraud could be eliminated.
“We see much business potential in Indonesia. However, this potential cannot be tapped because of, among others, transfer pricing practices. We are planning to reorder our regulation on transfer pricing,” he said.
Director General of Taxation Mochamad Tjiptardjo said the government was optimistic that a 13 percent tax ratio would be achieved by 2014. “We are going to better manage our tax administration. There is still a lot of tax we can collect,” he said.
Tjiptardjo rejected criticism by House members that the government hadn’t made an effort to explore tax potentials. “We work hard. I sleep only two hours a day,” he said. (ebf)
