T

he Indonesian government will separate the taxation office and the Finance Ministry beginning next year in a move that would provide much-needed flexibility for the revenue body.

Deliberations among top government officials from the Office of the Coordinating Economic Minister, the Finance Ministry and the Administrative and Bureaucratic Ministry on Wednesday evening concluded with the government making the taxation office an independent body in its revision to the General Taxation System (KUP) Law, which is currently being discussed by lawmakers.

The House of Representatives Commission XI overseeing finance, national development planning, banking and non-bank financial institutions will be responsible for revising the KUP Law, which has been listed as a priority in the National Legislation Program (Prolegnas) this year.

'€œ[The tax office] will be directly responsible to the President, but within the coordination line of the finance minister,'€ Finance Ministry secretary-general Kiagus Ahmad Badaruddin said Wednesday at his Jakarta office.

He explained that if the revised KUP Law was approved, Indonesia'€™s taxation office would operate similarly to how the Internal Revenue Service (IRS) operated in the US.

By becoming an autonomous body, structural and regulatory reforms to boost tax-collecting could be implemented internally.

'€œIf it becomes a separate entity, it could choose its own remuneration and incentive systems,'€ said Badaruddin. '€œThe budget [to finance the new taxation office] would come from the state budget.'€

The government'€™s proposal, he said, would include the possibility of forming three supporting deputies on tax-collection monitoring, tax-scope broadening and the internal consolidation of regional branches.