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Letter: Tax and NPWP
Thu, 07/31/2008 10:23 AM | Reader's Forum
I refer to The Jakarta Post's report of July 22 titled "Errant taxpayers to face fines, jail".
The report says that the tax office will impose fines and prison sentences upon those who fail to apply for tax identification numbers (NPWP) by the end of the year, as Indonesia currently only has six million registered taxpayers, compared to an estimated 40 million eligible taxpayers.
The tax office needs to be reminded that Indonesia only has 10, 217,577 credit card holders by the end of April 2008, according to Bank Indonesia, as quoted by Kontan newspaper of July 10.
Every cardholder carries multiple cards and it's also normal for cardholders to give supplementary cards to family members. Hence, the real number of "eligible cardholders" should be even lower than the six million registered taxpayers.
The alleged estimated 40 million eligible taxpayers are actually derived from those who pay PBB taxes (paying tax on land and buildings, or property taxes). But these are assets and to tax citizens based on assets, instead of income and consumption, is unusual.
These lands, buildings or properties are acquired over a long period of time through accumulation, or through delayed income, as with mortgages.
Private property ownership is the foundation of entrepreneurship in a modern economy. The long term negative impact on the economy of this indirect disincentive to property ownership is tremendous.
Despite the recent annual trade balance of about US$50 billions, Indonesia has suffered long-term capital outflows as seen from its current accounts.The recent surge in foreign exchange is more from portfolio investment, plus foreign direct investment.
Indonesia is not the only economy in Asia that has a low tax ratio. Taiwan has an even lower ratio at about 12.5, whereas China's tax ratio is about 20 percent of GDP, but China's VAT or consumption tax ratio is 17 percent and its corporate income tax ratio is only 25 percent.
Higher tax ratios might be achieved from higher VAT or consumption tax, but certainly not by targeting assets or by penalizing consumption of big ticket items, especially since Indonesia as a developing country is still very much in need of capital formation and accumulation.
SIA KA MOU
Jakarta
Alison (not verified) — Fri, 12/26/2008 - 8:55pm
Just to respond to Mr Tomaso comments...
What you are implying can be simply put as "Government ransacking people's properties" are AGAINST THE LAW . Unless they have solid proff that one has committed a crime NO GOVERNMENT on this planet earth has the right to do that or else they are nothing more than mafia boss who rape people's rights and properties and plunder their belongings.
On what bases of law do you come up with such CHILDISH SUGGESTIONS. Perhaps you should Quit playing too much video games and study the REAL WORLD
Alison (not verified) — Fri, 12/26/2008 - 8:40pm
To The previous posters that said the government should be "knocking on doors" so to speak of every luxury condos and asked for "proof of income" on how about they can afford to purchase these units are simply redicilous !! they have no rights to do that! and people who have money will simply fly elsewhere to put their money!! you expect people to comply to anarchy ? on what bases of law does any government has rights to do that to its people ? one government can only have those kinds of rights when they have solid proof that one has committed a crime.
How redicilous are your comments, unfounded, childish and can't be more farther from the truth.
It is as if to say that the government has the right to come to every peoples home and check on all their belongings!!!
Tomaso Tettamanti, Lugano Switzerland (not verified) — Thu, 07/31/2008 - 5:52pm
Perhaps Ms. Sia is unaware that a large proportion of the condo purchases in Jakarta are made on the instalment scheme by buyers paying "cash" from nefarious sources. Many of these purchases are from "laundered" money, whereby the condo buyers are hiding the fruits of their grafts or unreported business income.
The tax office would reap a huge windfall if it merely went to the addresses of the hi-rise condos in Jakarta and went through the owners' lists and asked each owner to justify the source of cash purchases. It would also be useful for a regulation to be passed to require condo developers to report cash purchasers to the tax office.
Of course, if many of the officers in the tax office themselves were buyers of these condos, they might be reluctant to pursue this strategy!