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Economic downturn hits tax revenues

Source
Jakarta Post - April 14, 2009

Erwida Maulia and Aditya Suharmoko, Jakarta – Constrained by the global downturn, Indonesia only managed to collect Rp 162 trillion (US$14.57 billion) in state revenue during the first quarter this year, or less than 20 percent of the full-year target in the state budget.

In the first three months of 2009, the government collected Rp 133.2 trillion in gross tax revenue (20.1 percent of the full-year target) and Rp 19.4 trillion in customs and excise revenue (26.3 percent of the target), Coordinating Minister for the economy Sri Mulyani Indrawati said in State Palace on Monday.

She was at a meeting attended by President Susilo Bambang Yudhoyono, Vice President Jusuf Kalla, State Secretary Hatta Radjasa and two other coordinating ministers. "Tax revenue declined, mostly from value added tax on imports, which contracted," said Mulyani.

According to the directorate general of taxation, VAT and luxury tax slid 4.4 percent in the first quarter of 2009. "The impact of the crisis was felt in our revenue," said Darmin Nasution, the director general of taxation.

But Darmin's office still managed to collect Rp 113.75 trillion in net tax revenue – gross revenue minus tax refunds – between January and March, a 1.9 percent increase from Rp 111.61 trillion collected in the same period last year.

Mulyani said manufacturing industry had the worst performance in terms of tax revenue. In the first quarter of 2008 the sector raised Rp 16.7 trillion in income tax, but in this year's first quarter the sector only raised Rp 13 trillion.

Manufacturing industry also only paid Rp 15.3 trillion in VAT between January and March, down from Rp 17.8 trillion a year earlier.

"Other sectors, like trade, hotels and restaurants; and transportation and communications were relatively stable," she said.

Mulyani added the government would keep monitoring the details on state revenue to get an accurate projection of current economic trends, adjusting state expenditure to match changing conditions.

But Darmin said economic activities had shown signs of picking up as the decline in VAT revenue on imports in March was less than in January. "Economic activities in March were better compared to January as seen from the tax indicators."

Last week, the Energy and Mineral Resources Ministry also said economic activities had picked up in March as seen from higher electricity consumption by industry.

Indonesia's economic growth, stood at 6.1 percent last year, but has slowed down since the fourth quarter of last year, with exports faltering as the global economic downturn has cut demand and pushed down prices of key commodities.

Mulyani said the economy might expand between 4.3 percent and 4.8 percent in the first three months this year, with a "mid point of 4.5 percent" due to quite high growth in private consumption.

She said that government spending reached between 8 percent and 13 percent, higher than in the first quarter of 2008.

According to the Finance Ministry, investment growth seems to have contracted by 50 percent to between 5 percent and 6.5 percent in the three-month period (usually it shows double-digit growth) and export growth contracted to between 6 percent and 9 percent.

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