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Legislators plan to adopt 'IRS-style tax system |
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Jumat, 06 Januari 2006 |
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Legislators say they are planning to revive a proposal to turn the Directorate General of Taxation into an independent agency along the lines of the U.S. Internal Revenue Service (IRS) during next week's deliberation of the new tax amendment bills.
The aim of separating the directorate general from the Ministry of Finance is to make it more efficient in increasing the taxpayer base and enforcing the tax legislation, said Rizal Djalil, a member of the House of Representatives' finance commission.
The directorate general has not fully focused on its duty to collect taxes and enforce the law as it has simultaneously been involved in policy making and oversight, said Rizal, who will chair the working committee deliberating the amendments.
The current setup allowed the tax directorate to become an excessively powerful institution with roles encroaching on those of the executive, legislature and judiciary all at the same time.
In this respect, it was completely different from the IRS, a branch of the U.S. Department of the Treasury, which is tasked only with the collection of taxes and the enforcement of tax legislation. The IRS had no role to play in policy making as this area was handled by other government entities.
Meanwhile, the IRS commissioner and chief counsel were selected by the president and confirmed by the senate, meaning that they were directly accountable to the president and not to officials in the Department of the Treasury.
A plan to adopt a similar system was first mooted in 2004, when a number of senior tax officials lobbied then president Megawati Soekarnoputri to approve the proposal at a time when the ministry was in the process of reorganizing itself.
It will be difficult for the tax directorate to effectively increase tax collection in the future under the present system. It should be more focused on its tasks and have less bureaucracy, said Rama Pratama, another member of the finance commission.
Rama, a legislator from the Prosperous Justice Party (PKS), said his fellow lawmakers had agreed to include the adoption of the IRS system during its review of Law No. 16/2000 on taxation arrangements and procedures.
Sources in the Ministry of Finance said the separation proposal was likely part of a bargaining effort designed to compensate the business community for the rejection of its demand for the incorporation of the principle of equality in the amendment bills.
The tax officials said that the only way to accommodate this would be to make the tax office independent and semi-private. I expect the separation demands will die down soon ..., said a source.
The tax office fell short of reaching its Rp 302.1 trillion (US$314 million) revenue collection target by Rp 3.7 trillion, or about 1.2 percent, last year.
This year, the directorate has targeted the collection of Rp 362 trillion, consisting of Rp 325 trillion from the non-oil and gas sector, with the remaining Rp 37 trillion coming from the oil and gas sector.
The number of taxpayers in Indonesia is widely considered as being too low, with many of the 10 million taxpayers recently claimed by the tax directorate most likely existing on paper only.
After sending out millions of tax number application forms to those it categorized as potential taxpayers over the past few months, there has been no word thus far on the real number of people who actually pay their taxes.
As of the end of 2004, only 3.67 million individuals and institutions paid taxes -- accounting for just 13.5 percent of Gross National Product (GNP) -- one of the lowest rates among major Asian economies.
Facts about the IRS
1. The IRS is a bureau of the Department of the Treasury. In 2004, the IRS collected more than US$2 trillion in revenue and processed more than 224 million tax returns.
2. The IRS spent just 48 U.S. cents for each $100 it collected in 2004.
3. The IRS provides taxpayers with top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.
4. The IRS helps the large majority of compliant taxpayers with the tax law, while ensuring that the minority who are unwilling to comply pay their fair share.
5. The IRS does not engage in making tax policies since such function is run by the Department of Treasury.
Source: www.irs.gov
Rendi Akhmad Witular, The Jakarta Post, Jakarta
Source: The Jakarta Post, January 6, 2006 |
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