Monday, 31 August 2009

National Taxation System must be Integrated

There is a plan to impose progressive tax and fuel tax on vehicle owners, while applying income tax and value added tax as well as regional taxes. They are various taxes viewed from administration standpoint, tax objects and others. Here, the main point is related to economic efficiency of the taxation system totally. Any of the vital issues is preventing a tax from overlapping with the other.

Principally, tax is a price of the use of public goods or service by communities. In this case, it’s necessary to re-think statement saying that tax is colleted without demand for achievement compensation from the government. In the modern era wherein the state concept has been deemed as a system of institution for public services, the principle of tax, viewed from benefits principle has been increasingly dominant.

Every tax must be able to demonstrate economic benefit of the development of public goods and service. The principle would be more suitable following the rampant campaign for good governance, demanding transparency and accountability.

Viewed from the administration level, which means dimension of good service and public service in public economy, the procurement cost of public goods must be borne by inhabitants of the sphere thereof or beneficiaries. Based on the spatial dimension of public goods and services, people may classify national, provincial, regental taxes and even taxes related to levies in neighborhood organizations (RT/RW), such as collection cost of rubbish of RT/RW. It clearly shows that tax is a source of funds for procuring goods used collectively in a right spatial dimension. The most concrete example is fund of road network system. The national road network system should be financed by national tax, provincial road network system should be financed by national tax, provincial road network by provincial tax and local road network by regental or municipal tax. It’s the basis principle.

Viewed from public economic standpoint, any of the public goods purely belonging to national dimension is defense surely under control of the Indonesian Military. Judicature also belongs to national dimension. If people refer to Regional Autonomy Law Number 32 Year 204, the central government manages only six businesses, namely foreign affairs, defense, security, judicature, monetary and fiscal and religious. Based on criteria of public economic science, national road network is actually national public goods not mentioned firmly in the law. Other public service also could have national dimension, such as center for the research of seeds of agricultural products and national administration system. It means criteria for national businesses mentioned in Law Number 32 year 2004 are not complete and potential to bring national difficulties.

Economic efficiency may be affected by inappropriate imposition of taxes. Levy on the transport of goods between two regencies, which passes through the third regency is an example. The burden would lower production of the commodity subject to the levy and totally, the same action would lower production in aggregate. The increase in pure regional income earned from the imposition of the levy would lower collective product of administration levels nationwide. People may point that the issuance of city transport license in Bogor, which is excessive, indeed increases the pure regional income but it also brings about a negative impact in the form of the rising number of empty city transport in the city, worsens traffic jam, the squandering of capital which is basically rare thus increasing inefficiency in national funds. The two examples are consequences of the imposition of taxes or levies not considering impact in aggregate. Many observers worry about the occurrence of the impact in government taxes, which is due time would be destructive to national economy, mainly those arising from the imposition of taxes which is not coordinated in all levels of national administration.

In relation thereto, the imposition of vehicle tax progressively, while applying fuel tax and parking levy needs to pass a study on integrated taxation and levy system. It’s necessary to separate tax on one having several cars or one family having several cars but the working family member is more than one, according to the number of cars which are owned. The imposition of progressive tax in the second case is negative particularly in a situation wherein the public transport system has not been adequate in the term of quantity, punctuality, convenience, imbalanced sphere of service. In cities in developed countries, public transport constitutes public service so as to obtain subsidy in considerable amount. It has not become a general principle of national city transport. In developed countries, fuel tax is the main source of funds to finance the maintenance of road so that the quality of road surface is guaranteed, in line with the volume of traffic flow.

In view of the disclosed issues, specialist debate systems potential to eliminate shortcoming in the existing taxation system. Tax duplication, for example, may be avoided by shifting tax system from income base to consumption. It’s tax system not imposing tax on tax object twice, deemed not supporting the increase in economic efficiency. Will the government make efforts to re-arrange the national taxation system? People are waiting due to numerous distortions.

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