Robert Go, Jakarta – The Indonesian government will step up tax-collection efforts, including the targeting of foreigners now living in the country, to boost revenues and control a mounting budget deficit.
Coordinating Economic Minister Rizal Ramli and Finance Minister Priyadi Praptosuhardjo have both confirmed this week the possibility that Indonesia could run a 70 to 75 trillion rupiah (S$12.6 billion to S$13.5 billion) deficit this year.
"According to our calculation, the budget deficit will go over 5 per cent of GDP. That is the case if we do nothing to check the problem," said Dr Rizal on Wednesday.
Mr Priyadi told reporters yesterday that the government considered the budget problem to be very serious and would focus its resources on dealing with the swelling deficit in the next few weeks.
One solution, according to the ministers and senior officials at the Finance Ministry, is to increase tax revenues, especially from the country's expatriate community.
Tax Directorate spokesman Nono Hanafi told The Straits Times that his office was preparing "all sorts of campaigns" to goad Indonesians, and foreigners who spend more than 183 days in the country, to pay their full tax liabilities.
He stressed that the government's aim was to increase Indonesian citizens" participation in the tax programme and said: "There are more than 200 million Indonesians, but only 1.3 million have tax IDs. Many more should have it and should regularly pay taxes." But collectors will soon start paying special attention to resident foreigners.
Said Mr Nono: "All expatriates will also be required to have tax numbers and pay tax to Indonesia. They earn a lot of money here, but their cost of living is much lower than in their countries. If they spend more than half the year here, they will be treated as Indonesians."
Tax experts have characterised past regulations governing both Indonesians and foreigners as confusing and have termed the authorities' collection and enforcement efforts as lackadaisical and inconsistent.
As a result, many living in the country, including most foreign nationals, paid little or no taxes. The government, however, has been firming up its tax codes and tax brackets in recent years.
Last November, it decreed that individuals earning more than 200 million rupiah each year would have to pay a 35-per-cent rate. And if the Tax Directorate gets its way, the tax ID number will become an integral part of everyday life in the country.
Processing a passport, applying for a credit card, flying outside the country, buying a car or a house and even opening a bank account will all need a tax ID. "People would not be able to dodge paying taxes in the future," said Mr Nono.
He and other sources in the Finance Ministry declined to comment on how much money the government could raise through improved taxation, saying that their brief was to help reduce the budget deficit and meet the directorate's targets.
But some government advisers, like Mr Amir Sambodo who is a close aide of Junior Minister for Restructuring Cacuk Sudarijanto, warned that even increased revenues will not help Indonesia's budget woes.
Mr Amri said: "Indonesia needs to stabilise its overall economic condition. Increased revenues alone won't be enough to fix the budget problem. Enforcing better taxation also has to be a careful process, one that won't scare away foreigners or foreign businesses. It is a matter of consistency and transparency."