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Anies issues new decrees on land, building tax exemption
The Jakarta administration has issued three new regulations on exemptions to the urban and rural land and building tax (PBB-P2)
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The Jakarta administration has issued three new regulations on exemptions to the urban and rural land and building tax (PBB-P2).
Jakarta Governor Anies Baswedan issued on April 9 the first of these regulations, Gubernatorial Decree No. 38/2019, on PBB-P2 exemptions for individuals and institutions with land and building assets worth less than Rp 1 billion (US$70,435) in taxable value of property (NJOP).
Article 4A of the decree stipulates that the tax exemption policy applies until Dec. 31, which has been interpreted as a move to eliminate the PBB-P2 exemption.
Despite the article’s inclusion, Anies said on April 23 that the administration had no intention to end the policy.
He further elaborated that the Jakarta administration had expanded the PBB-P2 tax exemption to apply to meritorious taxpayers in Gubernatorial Decree No. 42/2019.
The decree, which was issued on April 24, regulates tax exemptions for teachers, lecturers and educational workers, veterans, national heroes, honorary medal recipients, former presidents and vice presidents, former governors and deputy governors, retired military and police officers, and retired civil servants.
Decree No. 42/2019 replaces Gubernatorial Decree No. 84/2013, issued by then-Jakarta governor Joko “Jokowi” Widodo, which stipulated a PBB-P2 exemption of 75 percent for Independence veterans, Bintang Gerilya award recipients, former presidents and vice presidents, former governors and deputy governors, retired military and police personnel, and retired civil servants and their widows/widowers.
The 2013 decree was amended by Jokowi’s successor, Basuki Tjahaja Purnama.
Anies, formerly the education and culture minister in Jokowi’s Cabinet, said that teachers, lecturers and educators were “meritorious” in that they contributed to the nation’s progress. Hence, educators at all levels should be entitled to the PBB-P2 exemption.
Following the decree’s issuance, speculation has been rife that the expanded PBB-P2 exemption would affect the city’s tax revenue.
Jakarta Tax and Levy Board head Faisal Syafruddin refuted the speculation, saying that taxes from commercial entities would cover the reduced income from the PBB-P2.
He said over the weekend that the estimated potential loss from the tax exemption was around Rp 27 billion.
“[This] is not a large amount, because the growth in [tax revenue from] commercial areas in Jakarta is much higher than from residential areas,” he added.
On April 12, Anies issued Gubernatorial Decree No. 41/2019 on PBB-P2. Article 3 of the decree imposes a double rate for all taxpayers owning unused land in premium areas like Jl. M.H. Thamrin, Jl. Sudirman, Jl. Rasuna Said, Jl. Gatot Subroto and Jl. M.T. Haryono.
However, Article 3 (4) stipulates a PBB-P2 of half the general rate for landholders who transform unused land into public green space.
To ensure that the new decree would meet the tax target, the administration on Friday launched a fiscal cadastre. Faisal claimed it would be the first to collate data on all properties in the city, unlike the 2017 cadastre that contained data only on several subdistricts.
Faisal said that the administration, in cooperation with the Asian Development Bank, had deployed 721 field officers to collect actual data on land and building ownership from 267 subdistricts. This included field inspections of registered residential structures to ascertain that the properties were not being used for commercial purposes.
The fiscal cadastre would be gathered in two phases, with the first phase to be completed on June 30 and the second phase to be completed by the yearend.
Public policy expert Trubus Rahadiansyah has criticized Anies’ move as “inconsistent” for issuing the decree before the fiscal cadastre had been completed.
Trubus suggested that the administration should have collected taxpayers and property data beforehand to develop a comprehensive tax policy.
He added that any regulation that could affect the city’s finances must be discussed with the City Council first.
“Anything related to public policy must be discussed with the council, because the city administration consists of both the executive and legislative [branches]. There will be a domino effect if too many [taxpayers] are exempt. It might create a problem for [the city’s] tax income,” he said, adding that the effort appeared to be ‘political’.
Center for Indonesia Taxation Analysis executive director Yustinus Prastowo lauded the decrees, saying that the tax policy should not solely aim to gain income and should also protect low-middle income people.
“That is the function of tax as a public policy tool,” he said on Thursday.
