Irvan Tisnabudi – The recently passed law on regional taxes should be welcomed by business because it sends regional governments a clear signal to stop levying unreasonable or illegal taxes, a legislator who drafted the measure said.
Speaking at a public discussion about the law on Friday evening, Nursanita Nasution of the House of Representatives Commission XI overseeing financesaid the law's main aim was to increase legitimate tax revenues while clamping down on illegal levies.
"I think the central government needs to be stricter on regional governments, as there have been many regional regulations that have contributed to making the business atmosphere unfriendly for investors," Nursanita said.
In the absence of concrete local regulations, regional administrations have been known to charge varying – and often wide- ranging – taxes on different business sectors.
The legislation lists the various sectors local governments are allowed to levy taxes on while raising maximum rates on motor vehicles, cigarettes, hotels and bars, advertising and mining activities. It will be a closed list, so regions will not gain revenues from charging taxes on sectors not included under the new law.
However, the move is likely to see some key goods and services, including second cars, cigarettes and advertising, become more expensive.
An important article of the law would allow local governments to increase levies on car and motorcycle owners who buy second vehicles, as well as higher maximum taxes on hotels and nightclubs and ciga rettes.
The Indonesian Employers Association (Apindo) and carmakers have expressed concern about the law, fearing it could dramatically increase costs for businesses in some areas.
The association had earlier proposed a total of 700 regional regulations that needed to be either changed or taken off the books by the central government before the new tax law was made official. However, when the law was passed in August, Apindo said only 100 regulations had been dealt with.
Asked if the government was ignoring the aspirations of businesspeople by raising regional taxes with the new law, Budi Sitepu director general of regional taxes at the Finance Ministry, said on Friday that the state had thought this through.
"With the new tax law, everyone will have a clearer picture of how business is conducted in Indonesia, and there will be no more illegal 'ghost' taxes," Budi said.
"The central government has also fulfilled many demands from the Indonesian Employers Association by releasing the new tax law, as there are tax changes that will be good for the regional businessmen.
"I believe the new tax law will improve the overall business atmosphere in Indonesia."
He noted that regional governments would have leeway to implement some of the taxes later than the Jan. 1 deadline, to give businesses more time to adjust.
On Sunday, Djimanto, the head of Apindo, said that for the new tax measure to work, a closer relationship between the private sector and the central and regional governments was needed.
"The private sector needs to be involved in coordinating meetings about development [rakorbang] between regional governments and the central government, so their voices can be heard in future developments," he said.
Djimanto also expressed the need for the forming a "corporation" consisting of the central government, regional governments and the private sector to further enhance the relationship between the three groups.