House, govt still at odds over taxation review bill

Ary Hermawan, The Jakarta Post, Jakarta

The sluggish deliberation of the government's taxation law amendment bills resumed Thursday with the government and lawmakers still at odds over a number of key issues, which will likely further delay the enactment of the much-need legislation.

The passage of the bills, which will amend the 2000 General Taxation Arrangements and Procedures Law, the 2000 Income Tax Law and the 2000 Value-added Tax and Luxury Sales Tax Law, is considered crucial to the effort to improve the country's investment climate.

The House finance commission and the Finance Ministry are still working on the general taxation arrangements and procedures bill, which lays the foundations for the deliberation of the other two bills.

While analysts and investors have long been urging that the bills be passed into law as quickly as possible, the discussions between the government and House on the tax arrangements and procedures bill have been deadlocked since late 2005.

On Thursday, the bill was brought before a special committee charged with resolving the disagreements held over from the previous House session.

Speaking to lawmakers, Finance Minister Sri Mulyani again opposed the House's proposal for the establishment of an independent revenue agency that would no longer come under the auspices of the Finance Ministry. The agency, which was initially proposed by the National Mandate Party (PAN) faction, would replace the current Finance Ministry's directorate general of taxation.

""We need to carefully reconsider the idea of establishing an independent revenue agency. If such an agency were to be set up, it could result in a conflict of interest between agencies, thus making the management of the state finances even more difficult," she argued, adding that as long the directorate general was capable of boosting state revenue, there was no need to replace it.

The ministry also rejected the proposed creation of a taxation oversight commission, which she said would "subvert the structure of national government ... Its functions would also overlap with those of the Finance Ministry's Inspectorate General," she insisted.

Dradjad Wibowo (National Mandate Party) said the government's opposition to the proposed establishment of the two agencies was unreasonable given that many aspects of government were currently managed by interdepartmental agencies. "This is actually a question of good coordination," he said.

He argued that the main reason for the creation of a tax revenue agency was that the remit of the Finance Ministry was too big so that it found it difficult to properly manage everything. "The ministry should not be responsible for managing revenue and treasury functions at the same time," he said.

Another contentious issue concerns the procedures for filing objections against tax assessments as provided for under Article 25 of the bill. The government wants to impose financial disincentives on taxpayers whose objections are rejected, while the lawmakers reject this, arguing that there needs to be equality as between the tax service and taxpayers.

Despite the deadlock, the bill is still targeted for enactment during the current session, which ends in July.
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