Govt lowers tax target in revised 2010 state budget

Taxation revenues are estimated to drop Rp 9.5 trillion (US$1.03 billion) to Rp 733.24 trillion this year, according to the proposed revised 2010 state budget.

The figure is 75.22 percent of the estimated total state revenue of
Rp 974.82 trillion.

Taxation revenue comprises of the funds collected by the Finance Ministry’s Directorate General of taxation and Directorate General of Customs and Excise.

In the original 2010 budget, taxation revenues were estimated to reach Rp 742.74 trillion, or 78.21 percent of the estimated total state revenue of Rp 949.66 trillion.

Finance Minister Sri Mulyani Indrawati said Friday that taxation revenues had been revised downwards because of a lower tax base resulting from below-target tax revenue in 2009.

In the revised 2009 budget, taxation revenues were expected to reach Rp 652 trillion, but the actual realized revenue has proved to be lower, as tax revenue failed to reach the target, said Mulyani.

Tax revenue last year reached Rp 565.77 trillion, or 97.99 percent of the target, Director General of Taxation M. Tjiptardjo said in early January.

Mulyani said there was a tax rebate to state-run oil and gas firm PT Pertamina in 2009, which
caused a difference between tax revenue received and tax revenue booked in the government’s financial report.

The tax rebate comprised tax paid by the government in respect of capital goods imported by Pertamina.

“The government’s paid these taxes for Pertamina, which were quite significant at Rp 14 trillion, and this would not be repeated in 2010 ... That’s why in the revised 2010 budget the target has been adjusted to take into account the actual amount realized in 2009,” she said.

Mulyani also said the government would cut the amount of the government’s paid value-added taxes for certain industries because most industries had not used the incentives provided by the government.

“Some sectors proposed by the Industry Ministry did not use the incentive,” she said.

The government also provided an incentive in paying import duty in support of 14 business sectors last year, but of the Rp 1.81 trillion import duty rebates provided for, the concerned economic sectors used only 6.95 percent of the total available as of November 2009, according to the Directorate General of Customs and Excise.

In the proposed revised 2010 budget the government aims to spend Rp 1,104.64 trillion in total
expenditure, up 5.4 percent from Rp 1,047.67 trillion allocated in the 2010 budget.

Energy subsidies are estimated to reach Rp 143.79 trillion, up 35 percent from Rp 106.53 trillion allocated in the original 2010 budget.

The budget deficit has swollen to Rp 129.82 trillion according to the revised calculations, a 32.5 percent increase up from the Rp 98.01 trillion stated in the original 2010 budget.

Director General of Taxation Tjiptarjo said earlier that there would be a decline in potential tax revenues by Rp 34 trillion in 2010 due to the cut in corporate income tax rates.

“The potential loss in state revenues could reach Rp 34 trillion,” he told a hearing at the House of Representatives recently.

The corporate tax income rate was 30 percent in 2008 and was lowered to 28 percent in 2009. The rate has been further lowered to 25 percent in 2010.