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Untangling tax, laying roads keys to growth: Minister

Source
Jakarta Globe - June 2, 2010

Irvan Tisnabudi – Tax reform and infrastructure development are among the keys to achieving the economic growth target in 2011, Finance Minister Agus Martowardojo told lawmakers on Wednesday.

Speaking to the House of Representatives' Commission XI, which oversees financial affairs, Agus said infrastructure development, including power plants, roads and ports, would be made a national priority. Central and local governments would coordinate their regulations to ensure development, he said.

Also key to growth was continuing reforms at the tax office to ensure that state revenues were maximized, he said. "This year, the tax [to gross domestic product] ratio is 11.3 percent. We have targeted a 12 percent ratio for 2011," he said.

The government's commitment to overhauling the tax office has been questioned after former Finance Minister Sri Mulyani Indrawati, a strong reformer, resigned last month. She he had been under pressure for months, including over high-profile tax cases. In the wake of Sri Mulyani's exit, some members of the commission from the Golkar Party have called for the removal of top tax officials over their handling of tax investigations, and a revision of the tax law that they said granted officials too much power.

The office is probing alleged tax abuses at companies affiliated with the Bakrie Group, which is owned by the family of Golkar chairman Aburizal Bakrie.

Commission XI member Edwin Kawilarang, of the Golkar Party, on Wednesday agreed that infrastructure development was crucial for accelerating growth. "Infrastructure that will improve transportation will be the main driver of economic growth next year," he said.

Agus's success at reforming the tax office will also play a pivotal role, Edwin said. "The new minister's performance has yet to be evaluated, as he has just started his work, but his support for reforms in his ministry will largely determine the nation's economic growth."

The Finance Ministry has targeted GDP to grow by 6.2 to 6.4 percent next year. However, several commission members have urged the ministry to push its target higher.

"We ask that the target be 7 percent, as we expect next year's exports and investment and infrastructure improvement to grow the nation's economy by at least that amount," Edison Betaubun of Golkar said.

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