Indonesia wants more tax revenue in 2007

Rendi Akhmad Witular, The Jakarta Post, Jakarta

With no plan to raise tax rates to allow rapid growth in the real sector next year, the government will concentrate on expanding tax revenue through netting more registered taxpayers and improving tax administration.

The plan is likely to lead to a crackdown on tax evaders as well as an intensive anticorruption campaign at the Finance Ministry’s Directorate General of Taxation, which is struggling to weed out corrupt officials.

Vice President Jusuf Kalla told reporters Friday that the expansion in tax revenue would be derived from increasing the number of taxpayers, which was considered small compared to the actual potential.

“Our tax ratio is still low at around 13 percent. Other countries could reach 18 percent. We expect the new tax laws will help expand our taxpayer base, and create a widening of the taxpayers,” said the former businessman.

The government has earmarked an increase in tax revenue by 21 percent to Rp 505.9 trillion (US$55.5 billion) for 2007, the highest growth pace in history. Annual tax revenue growth is usually less than 20 percent.

The tax ratio for next year is set at 14.3 percent of the gross domestic product, up from 13.6 percent. Currently, less than a fifth of the country’s 220 million people are registered taxpayers, while the tax service has earned a reputation for corruption.

As of July 31, the Directorate General of Taxation had collected tax revenue amounting to Rp 190 trillion, or 52 percent of the Rp 362 trillion that should be collected by the directorate this year.

Finance Minister Sri Mulyani Indrawati has said that the government will work toward improving the taxation system through amendments to the country’s taxation legislation that have been submitted to the House of Representatives.

The ministry will sort out problems that persist in tax administration to prevent potential losses.

Mulyani seems upbeat that the government will be able to secure more registered taxpayers and reduce corruption after she recently appointed her longtime colleague, Darmin Nasution, to head the tax service.

Analysts believe Darmin, who is considered an outsider in the clique of established tax officials and a relatively “clean” figure within the government, would have the resolve to push through reforms.

Kalla later also emphasized the government’s confidence about achieving 6.3 percent economic growth next year on the back of increasing investment and real sector activities.

“Actually our growth capacity is beyond 6.3 percent next year. We can achieve more than that. This year’s slower growth is because there are a lot (natural) disasters and a delay in the construction of infrastructure project.”

Next year’s growth, he added, would also be fueled by activities in the infrastructure sector and an improved subsidy for the poor. The growth environment would be further supported by lower interest rates.

Kalla also slammed economists who he accused of delighting in negative data over positive developments. He said they were unreasonable in roundly criticizing the government without providing sufficient data and supporting arguments.