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View all search resultsProperty tax loss will be covered by developers' contribution
The plan by Jakarta Governor Basuki “Ahok” Tjahaja Purnama to scrap property taxes for homes priced below Rp 2 billion (US$146,896) will become a burden for the business community, particularly property developers, since the revenue shortfall will be covered by a contribution from these developers
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Fishermen of Muara Angke hold stage a rally on a man-made islet, known as Islet G, in North Jakarta on , April 17, protesting against reclamation work in Jakarta Bay. (The Jakarta Post/Seto Wardhana)
T
he plan by Jakarta Governor Basuki “Ahok” Tjahaja Purnama to scrap property taxes for homes priced below Rp 2 billion (US$146,896) will become a burden for the business community, particularly property developers, since the revenue shortfall will be covered by a contribution from these developers.
If the city administration goes ahead with its plan to scrap property taxes for homes priced below Rp 2 billion, the city will lose Rp 70 trillion in revenue in 2017, the governor said. “Therefore next year I will require the working units under the city administration to arrange a new version of the draft budget,” Ahok said at City Hall on Thursday.
Ahok had previously made an agreement with some developers that they had to pay a 15 percent contribution to the city administration from the total sales of properties constructed on the reclaimed land in Jakarta Bay. He estimated the total contribution from the reclamation developers would amount to some Rp 100 trillion.
However, the Corruption Eradication Commission (KPK) questioned the legal basis of the city administration making such an agreement with the developers, particularly because the City Council failed to approve two reclamation bills, following the emergence of alleged corruption involving a city councilor.
Ahok argued as a public official he had the right to introduce the measure given the absence of regulations on the issue.
Another source of city revenue is the fines that should be paid by developers who violate the city’s Coefficient Building Floor (KLB), said Ahok, adding that his administration had so far collected about Rp 4 trillion from these fines.
The city administration has already scrapped property taxes for homes priced below Rp 1 billion. Ahok on Wednesday raised the idea of scrapping property taxes for all homes, starting from those priced below Rp 2 billion.
He argued that such taxes were inherited from the Dutch colonial administration. “So, why should we follow the Dutch system? Homes of Indonesian citizens should not be taxed. We should draw taxes from foreigners, not from our own people,” said Ahok.
The governor also promised to improve efficiency in spending the city budget, by for example, closely monitoring the expenditures of each working unit; limiting the recruitment of new civil servants and cutting the salaries of civil servants who will not perform well. (bbn)
