Taxmen cometh in Indonesia
JAKARTA — The tax man cometh. And next year in Indonesia, there will be more of them.
A woman helps a friend with her hair outside her home in a South Jakarta slum in Jakarta, Indonesia Oct 28. The government needs to increase tax collection and overall revenue in order to fund initiatives to help the poor. (AP photo)
In his mission to raise revenue available for investing in roads, rail and ports in Southeast Asia's largest economy, President Joko Widodo's administration is planning to expand the ranks of tax collectors. Finance Minister Bambang Brodjonegoro, who took office Oct 27, said in an interview yesterday that the campaign will target both companies and individuals.
Jokowi, as the president who took office last week is known, also will probably scale back fuel subsidies by year-end as a first step in creating fiscal space for investment and assistance for the poor in 2015, according to Mr Brodjonegoro. The goal is to boost Indonesia's slowing economic growth and address income inequality in the world's fourth most-populous nation.
Indonesia President Joko Widodo's cabinet ministers; Finance Minister Bambang Brodjonegoro (centre), Minister of Industry Saleh Husin (left) and Agriculture Minister Amran Sulaiman chat before a cabinet meeting with other ministers of economy at the palace in Jakarta on Oct 30. Widodo said he would discuss tax issues at the opening of his meeting with the minister of economy. (AFP photo)
"Our concern now is how to make growth with quality," Mr Brodjonegoro, 48, said at the finance ministry in Jakarta, in his first interview since being appointed. The president wants to reduce the income gap and has stressed the importance of an economic program "that has direct impact to the common people," he said.
Boosting tax collection will be a challenge, said David Sumual, chief economist at PT Bank Central Asia in Jakarta.
"It's quite hard, we have declining economic growth," said Mr Sumual. "It depends on the political will of the government. It depends on the resources at the ministry of finance. Sometimes the bureaucracy doesn't want to do it."
But Jokowi needs funds to ensure every Indonesian, especially the "poor or near poor," has access to basic health and education services, Mr Brodjonegoro said.
The government will improve profiling of tax payers and will hire more account representatives and tax officers, the minister said. The comments back up a pledge this week by the tax office chief, Fuad Rahmany, to go directly to chief executives and "request they pay and if necessary, we will threaten them."
Jokowi has targeted a tax-to-gross domestic product ratio of 16% within his first term.
"Now, we only have tax ratio of around 12%," Mr Brodjonegoro said. "Basically our target next year is to increase that, but more importantly, to meet the target first. Because usually we have the target, but we never achieve the target."
Improving the government's budget is the first step toward achieving Jokowi's promises to voters, as he inherits an economy expanding at its slowest since 2009 and a near-record current- account deficit that is weighing on the rupiah. The leader plans to bolster sea-transport links and ports in the world's largest archipelago, one of his priorities as he aims for a growth pace Indonesia hasn't seen since before the Asian financial crisis of the late 1990s.
"Bigger fiscal space could come from two sources - one from optimizing the revenue, from tax especially, and secondly of course we need to reallocate our spending from consumptive or non-productive to the productive," Mr Brodjonegoro said. "If we have more productive spending, it will create growth by itself, especially if we focus on infrastructure."