Tax revenues may reach Rp 1,000t target by 2013

The government will intensify efforts to achieve a tax revenue target of Rp 1,000 trillion (US$108 billion) by 2013, which will account for the larger part of state revenues, the Finance Ministry said.

The calculation of the Rp 1,000 trillion figure is based on an estimate of tax growth of 19.7 percent annually and an assumption that the economy will grow by 6.4 percent on average between 2010 and 2013 — Director General of Taxation M. Tjiptardjo said Monday in a seminar on “Dissecting the 2010 State Budget” at the ministry.

“The average natural growth of tax revenue in four years (2010-2013) is 12 percent. The average extra efforts that must be made in four years amount to 7.7 percent,” he said.

This year’s tax revenue is Rp 611.2 trillion, or 64.4 percent of the total state revenue of Rp 949.7 trillion, as stated in the 2010 state budget.

Tjiptardjo said there are four strategies to achieve the Rp 1,000 trillion target. Those include
continuing administrative reform at the Directorate General of Taxation; providing incentives to certain business sectors; continuing the directorate general’s program in mapping, profiling and benchmarking taxpayers; and continuing law enforcement against tax evaders.

Administrative reform includes improving infrastructure and human resources at the directorate general, he said.

He added that the government should provide incentives to sectors contributing significant tax revenue and business sectors with expansion potential such as mining, financial services, telecommunications, construction and agriculture.

At present, the sectors that contribute most to tax revenue include manufacturing; wholesaling and retailing; financial services, mining and drilling; transportation, warehousing and communications; construction and real estate.

He also said small- and medium-scale enterprises (SMEs) could be given incentives. “This sector is immune to volatility. I think it should be given incentives,” he said. Last year, the growth rate of taxes paid by SMEs was larger than that of big companies and this trend is likely to continue, he added.

Tjiptardjo said that the directorate general would continue to map, profile and benchmark business sectors to determine the amount of tax that should be paid by businesses. If there are tax evaders, the office will pursue them, he added.

Tax observer Darussalam of the University of Indonesia said the government should not put the burden on the directorate general alone to reach the target of Rp 1,000 trillion in tax revenue.

“We are talking about a system here, of which the Directorate General of Taxation is part,” he said.

Four other institutions and groups should be involved to help meet this target, he said.

These included the House of Representatives that endorses tax laws, the courts that
handle tax disputes, tax consultants and the tax ombudsman.

The government still relies on foreign debts and bond issuance to help finance the state budget.

This year alone, the government plans to raise up to Rp 175.06 trillion from the issuance of
bonds to plug the 2010 budget deficit which is expected to reach Rp 98.01 trillion.

In less than two months the government has successfully raised Rp 44.06 trillion or about 25 percent of its total bond issuance target. In the next few months, the government will sell more bonds either in the domestic or international market so as to raise more funds to help fill the budget deficit.