Autonomy Watch: Regional autonomy makes business licensing ‘more complicated’

A business association says regional autonomy led to more complicated procedures to obtain business licenses, with more charges being imposed to obtain licenses for commercial activities.

Panudiana Kuhn, the chairman of the Bali branch of the Indonesian Businessmen Association, said that in many regions, the local administration used bylaws to charge more levies on businesses.

“The procedures from the central government seem easy, but at the local level, it gets tricky. Before regional autonomy, I believe it was easier,” Panudiana told The Jakarta Post.

“Businesses can secure licenses, but it depends on how much they pay. If they know the officials personally, the process becomes much easier.”

He said that in many areas, especially in eastern Indonesia, local officials used licensing as a source
of funding to run in regional elections.

“Foreign investors are even willing to pay to support candidates in regional elections who campaign on their vested interests.”

To make licensing more efficient, he suggested that businesses should be freed from their obligation to renew their licenses every five years, as long as they were not behind on tax payments.

“[Renewing licenses] is a complicated process. I think what is more important is that we pay taxes. The administration needs to ensure that all legal businesses pay their taxes.”

He called on regional administrations to combat illegal businesses and therefore increase their revenues (PAD).

“[Illegal businesses] aren’t licensed by definition. They don’t pay taxes. The regional administrations should crack down on them and stem the loss to state revenues.”

Many businesses have criticized the complicated regulations in different regions, saying they were forced to pay various charges in addition to those already paid to the central government.

They claim thousands of regional bylaws on taxes, charges and retributions throughout the country that hurt private investment and regional trade continue to remain in force, despite the Finance Ministry’s call to the Home Ministry to annul the bylaws.

As of last year, the Finance Ministry recommended the Home Ministry revoke more than 4,885 regional bylaws, saying they encroached on national laws, but only 1,835 of these has been annulled.

The new 2009 Regional Tax and User Fee Law approved by the government last year stipulates provisions on the division of power with regard to taxes between the national, provincial, regency and municipal governments.

The new law also stipulates only 16 types of taxes and user fees regional administrations are authorized to impose.

Regencies and municipalities are authorized to impose eleven of them in areas with local autonomy, with the other five are mandated for provincial administrations.

Regional Autonomy Watch (KPPOD) cited the Finance Ministry’s data that showed 36 percent of all bylaws and regional regulations on tax and retributions had to be suspended because they ran counter to the 2009 Tax and Retribution Law.

From 2001 to 2009, the organization called on the Home Ministry to suspend 3,735 regional regulations. In response, the ministry suspended 945 regulations, issued warning letters for 22 regulations and revised six.

The regulations mostly require businesses to pay excessive extra costs that were illegal, according to the 2009 law.

Panudiana said that compared to other provinces, Bali better facilitated businesses in obtaining licenses.

He said the problem with Bali was unclear regulation on spatial planning, which he blamed for confusing investors and forcing them to spend more to obtain building licenses.

Bali administration spokesman I Ketut Teneng said the administration had always ensured that all prevailing bylaws in the province complied with national laws.

“We have received no complaints from businesspeople and we have implemented an integrated system for all licensing matters,” he said.

He added that the province’s licensing agency was currently reviewing the business licenses it had issued, as well as regulations on local taxes and retributions.

“We are reviewing the licenses in each business sector to see whether there are regulations that no longer apply. We may also adjust some charges.”

The review is expected to be completed in the next few weeks.