From Government of Indonesia

Tax Law Passed by House

The House of Representatives on Tuesday (19/6/07) passed the new Taxation Arrangements and Procedures Law, an important step in a long-awaited process of revision of Indonesia’s three taxation laws.

The law aims at creating a regulatory framework to make it easier for taxpayers to appeal official rulings, and to reduce incidences of arbitrary detention of taxpayers, Dow Jones Newswires reported.

It also contains provisions under which taxpayers will not be obliged to pay disputed taxes until a court ruling has been made.
Finance Minister Sri Mulyani Indrawati said the provisions would serve to give taxpayers greater legal standing.

"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 said, according to The Jakarta Post.

Tax Director General Darmin Nasution has said it is hoped the new law will assist in widening the taxpayer base. At the moment, he says, only around 60% of household heads, or 30 million, are eligible to pay tax, but only 3.1 million are registered as taxpayers.

“Out of the 3.1 million people, only about 35% so far have submitted their tax forms to the tax office,” he said.

The House is also reviewing the Income Tax Law and the Value-added Tax and Luxury Sales Tax Law, and Nasution says he expects debate on new versions to be speedy.

Bank Indonesia said it expects end-year inflation to be at the lower end of its projected range of 5% to 7% as food prices have stabilized.

“Hopefully, we can have the lower-end of our target” for 2007, said deputy governor Aslim Tadjuddin. Inflation will probably be “below 6%,” he said in an interview with Bloomberg News.

Coordinating Economics Minister Boediono said he expected the economy to grow by as much as 6.3% in the second quarter, compared to growth of 5.97% in the first quarter.

Production from several sectors, especially from agriculture, has picked up, and total investment in the country has increased, spurring higher growth, Boediono told reporters, according to Dow Jones Newswires.

Finance Ministry fiscal policy head Anggito Abimanyu said Indonesian imports of capital goods were higher over the second quarter of 2007 than in the first quarter, but did not cite figures.

The government also announced it wanted to trim spending on fuel subsidies by up to Rp22.5 trillion ($2.5 billion) in the 2008 budget by cutting use of heavily subsidized kerosene and reducing subsidy spending on vehicle fuels.

Luluk Sumiarso, Director General of Oil and Gas at the Energy and Mineral Resources Ministry, told the House’s energy commission on Tuesday that a program to replace kerosene for household use with LPG would reduce usage to 8.6 million kiloliters (kl) next year from 9.9 million kl this year, The Jakarta Post reported.

The government would also reduce the quota of subsidized gasoline to 16.9 million kl in 2008 from 17 million kl this year. However, it would maintain the quota for subsidized diesel next year at 11 million kl.

Daihatsu announced that it would increase its production capacity in Indonesia by around a third by October to 150,000 units from 114,000 units.

The additional capacity, which will cost the company Rp1.2 trillion ($134.5 million), is part of its plan to boost its capacity to 270,000 units by 2010.
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