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Compensation funds for fuel price hike already available
Though stepping back from reducing energy subsidies this year, the current government has prepared a social safety net scheme that will make it easier for president-elect Joko âJokowiâ Widodo to enact a planned fuel price hike
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hough stepping back from reducing energy subsidies this year, the current government has prepared a social safety net scheme that will make it easier for president-elect Joko 'Jokowi' Widodo to enact a planned fuel price hike.
Finance Minister Chatib Basri has revealed that there is already Rp 5 trillion (US$427 million) in appropriations for social safety programs in the revised 2014 state budget, win anticipation of a potential adjustment in subsidized fuel prices this year.
This means that Jokowi will not have to endure the kind of protracted political haggling encountered by President Susilo Bambang Yudhoyono last year, when he had to seek lawmakers' approval for social assistance funds that were distributed to the poor in compensation for the rise in fuel prices.
'It's like a blank check,' Chatib said in an interview with The Jakarta Post in his office on Monday, referring to the compensation funds set aside for poor people, which according to him could be sufficient for three months in the case of a fuel price rise.
He added that the National Team for Accelerating Poverty Reduction (TNP2K) had updated its database of poor people, enabling the new government to distribute the compensation funds to the poorest segment of the people.
- Govt has allocated Rp 5 trillion in compensation funds, says Chatib
- Requirements in place should fuel price hike go ahead
'So if the fuel price hike goes ahead, everything that's needed is already in place,' said Chatib. 'They [the new government] don't need to reinvent the wheel.'
Chatib, an outspoken advocate of energy reform in Indonesia, failed to convince Yudhoyono to raise fuel prices again this year, the President having previously increased the price of subsidized fuel by 44 percent to Rp 6,500 per liter in June last year.
The poorly distributed subsidized fuel ' a large proportion of which is consumed by the middle-class ' is seen as a challenge for Jokowi if he is to fulfill his campaign pledge of starting more infrastructure projects to boost economic growth.
The 2015 state budget itself has limited fiscal space for additional spending, with the fuel subsidy alone consuming 15 percent of the total state spending of Rp 2 quadrillion, while mandatory and fixed spending required by specific laws on education, village funds, health and other routine expenditures for personnel and debt servicing account for more than 70 percent.
Besides providing the soft infrastructure necessary for a fuel price hike, the incumbent administration has also initiated a reform in individual income tax collection that will help Jokowi to boost state revenue.
Last week, Chatib met Surabaya Mayor Tri Rismaharini and succeeded in striking a deal that will give the taxation office access to property and land ownership data in a bid to increase tax collection from individual taxpayers.
Other provinces such as Jakarta and Bali would soon follow suit, said Chatib, who argued that such agreements with regional governments would allow the taxation office to crosscheck data on the income and assets of individual taxpayers, thereby minimizing tax evasion.
'Currently, each account representative at the taxation office has to check at least 3,000 individual taxpayers. They mostly have to guess taxpayers' assets and incomes,' Chatib noted.
'For our tax collection efforts, it would be easier for them [tax officers] if data for car and property ownership were available online.'
President-elect Jokowi has said that he planned to boost revenues in a country where the tax receipts-to-gross domestic product (GDP) ratio stands at around 12 percent, among the lowest in Southeast Asia.
