House finally enacts new tax law after two years

The Jakarta Post, Jakarta

All ten factions in the House of Representatives agreed during a plenary session Tuesday to enact a new Taxation Arrangements and Procedures Law, with the government and lawmakers expressing the hope that it will place taxpayers and the tax service on a more equal footing.

The enactment of the new legislation, which was also witnessed by Finance Minister Sri Mulyani Indrawati, amends the equivalent law passed in 2000. The new legislation was first introduced to the House in 2005.

Most lawmakers hailed the new law as being "taxpayer-friendly" as it affords greater legal rights to taxpayers, and introduces tougher penalties for tax officials found guilty of misconduct, thus putting the two sides on a more equal footing.

Among the provisions that are said to be "friendly" to taxpayers is one allowing taxpayers appealing assessments to the tax tribunal to first pay the amount they believe they owe based on their own calculations.

Under the previous legislation, taxpayers had to pay 50 percent of the tax service's assessment before being allowed to file an appeal.

The new law also mandates the creation of a semi-independent revenue oversight board to oversee the performance of tax officials, while another article provides for fines of up to Rp 50 million (US$5,600), or a year's imprisonment, for disclosing confidential taxpayer information.

Minister Mulyani said that these provisions would serve to give taxpayers greater legal standing, while admitting that they could also lead to delays in the collection of tax arrears.

"I don't think there will be any retrenchment in tax revenues. The government has calculated this objectively and carefully. There won't be a loss in revenue, but there could be delays in collection," she explained.

Darmin Nasution, the director general for taxation, also has said that the new pro-taxpayer provisions would not lead to reductions in revenues as the legislation also imposed significant fines on taxpayers who lost their appeals.

Under the new law, if a taxpayer partially or fully loses his appeal before the tribunal, he will have to pay a fine amounting to 50 percent of the total amount of tax owed as determined by the court.

The amount of the fine doubles if they further appeal the decision to the high court and still lose.

Mulyani welcomed the mandated establishment of an oversight board. This will be directly accountable to the finance minister, and will oversee the work of tax officials to help minimize abuses.

"With this board, we expect to be able to reduce abuses and irregularities in the collection and management of tax revenues," she said.

In 2005, the government submitted the bill on which the new legislation is based as part of a package of three bills on taxation reform.

Now that the first of these has been enacted, the House and government will focus on pushing through the remaining two bills -- the income tax bill, and VAT and luxury tax bill.
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