TAXATION AND TAX MANAGEMENT

Time after time with the increasing need of state’s expenditure and the expanding Government’s organization at central and regional level, where the number of personnel increased accordingly, the need for increased tax income became inevitable.

Today target of tax revenues was increased to above Rp 1,000 trillion of the total volume of APBN State Budget of Rp 1,600 trillion. A figure as high as Rp 1,000 trillion was no big deal for a country of enormous expanse, abundant natural wealth and vast population as Indonesia.

This year, supposedly tax revenues had exceeded Rp 1,500 trillion, but due to scarcity of data, limited info-base and inferior control system and high degree of corruption, the number of tax subjects organizations or individuals increased only thinly year after year and the total tax income was by proportion still too small against the nation’s GDP.

Tax revenues of 2013 was targeted at Rp 1,179 trillion, an increase of 12% against 2012. With target of that size, tax ratio Increased from 11.9% to become 12.7%. With additional income from natural resources and regional contribution, Indonesia’s tax ratio this year was around 15.8%.

With the same calculation base, tax ratio in Malaysia was above 18% and in some Asean countries had reached above 20%. With inclusion of regional income and natural resources tax ratio in Japan was above 28% and in South Korea 27%. Indonesia’s ;ow Tax-to-GDP ratio was only due to increased GDP but also meager increase of tax income which was not in parallel with Indonesia’s economic growth.

Many micro and small-business companies had not paid taxes, many of them were even not registered as tax subjects. Many medium and big companies had not paid their taxes obediently and correctly. Many big companies make eyes with tax collectors and tax consultants to play the trick of tax manipulation.

Gradually the nominal amount of tax revenues kept increasing from Rp 425 trillion in 2004 to become Rp 885 trillion in 2012 and was projected to pass through Rp 1,100 trillion next year. For the past seven years tax revenues increased only by twofold. If there were no leaking, and there was expansion of taxpayers’ base, improvement in taxation system, better control, then tax revenues supposedly increase by 3.5 times in seven years.

Low tax payment came from individual tax subjects (WP). The number of individual WP was posted at 21 million people while organizations around 2 million. If companies on the average employed 25 workers, the number of individual WP should be at least 50 million people. In addition to that there were still around 20 people who were taxworthy. The 70 million WP was reasonable because it was in proportion against the number of middle class in Indonesia.

Low tax revenues was also caused by leakings. The case of manipulation which involved tax collectors who were accused of receiving bribery was only the peak of the big iceberg of the corrupted taxation system in Indonesia. Many similar cases which were not unveiled when accumulated came to the amount of tens of millions of Rupiah a year.

To maximize tax income, it seemed right if the Directorate General of Tax (DJP) aggressively launced a number of programs to expand taxpayers database and increase tax revenues. Tax census must be extended to all provinces to accurately compile data of WP, organization or individuals. These were the right step which deserved support.

DJP was also demanded to step up application of Information Technology to minimize any possible collusion another fraudulent potentials. Direct personal contact between tax collector and tax subjects must be minimized and eventually be totally abolished. All tax invoices shall be done by on-line so possible leakings could be prevented.

In case of any dispute or protest, communication and exchange of information could be done the electronic way, if there was still no meeting point the solution would be to bring the case to the Tax Court. The process of tax judgment should be fair and honest so tax subject needed not to be afraid of being bluffed by tax collectors.

The whistle-blowing system being applied should better be continued. Thumbs up for Tax Dept (DJP) officials who encouraged tax collectors to spy one another and report any tax collector who tried to play any trick. This system, if properly applied, might reduce leakings and minimize cases of corruption.

About reformation of the bureaucracy, the reformation within the circles of the Ministry of Finance should better not be confined to betterment of remuneration or salary payment. Salary of civil servants at the Ministry of Finance which had been increased twice as much might not necessarily be followed by better performance. The was a great challenge for the ministry of Finance and the Directorate General of Taxation. With tax-to-budget ratio of above 70%, reformation of the bureaucracy may not lose steam or officials acting merely by rethorics.

It should be understandable that reliant on tax revenues was so great in times when income from other sources was relatively not reliable. The Government might expect dividend from State Owned Enterprises (BUMN) but it bounched back as demand for caoital strengthening for BUMN whereby to compete against private companies.

The storming demand to lower dividend payout ratio from the previous 50% to around 30% also accounted for the difficulty in fulfilling states revenues. The result was that state budget was always in a state of deficit and it was hard to set up a balanced budget.

On the other hand tax subjects would gladly be obedient taxpayers as long as the fund was spent on infra-structure building to increase national efficiency and productivity. Taxpayers were reluctant to perform their duties if cases of corruption at the Tax Dept. were let to happen. They thought that it was not worthwhile to pay taxes if part of the money were pocketed by corruptors.

The utility of tax revenues mostly for capital expenditure such as infra-structure building would generate a broad impact on the nation’s economy. If this were actually executed the target to attain tax revenues up to Rp 1,500 trillion making a tax ratio of at least 17% could hopefully be attained in not too distant future. Meanwhile the public were called to be good taxpayers and at the same time participate in the controlling process.    

 Business News - September 7, 2012

WOOD VERIFICATION LEGALITY SYSTEM POTENTIAL TO EXPAND EXPORT MARKET

The government must give assurance that the international world, especially the European Union, could accept Wood Legality Verification System (SVLK) certificate as a forest management instrument approaching the mandatory application of the regulation at the end of this year. “The assurance must be of international scale to show government’s reputation. If this can be applied, SVLK application could expand Indonesia’s export market”, said Chairman of Indonesian Pulp and Paper Association (APKI), Misbahul Huda. He also reminded the government to consider providing incentive for concession and SVLK certificate holders.

This is because concession holders are committed to apply sustainable management, and the cost for obtaining certification is uncheap”, he said. Huda is in the opinion that incentive could be in the form of legal assurance on land certainty and dispute with the community around concession area and government’s support in facing black campaign launched by foreign non-governmental institutions (NGO). “So, the problem is not merely about illegal timber, but also about clear and clear land area as well as anticipation of black campaign launched by NGO who brings foreign trade mission”, Huda said. Huda admitted that so far, Indonesia’s export market, especially pulp market, has been decreasing, especially due to black campaign launched by foreign NGO.

While, in fact, Huda said, Indonesia’s potency to broaden export market for pulp and paper is high. Concerning market expansion, President Director of PT Riau Andalan Pulp and Paper (RAPP), Kusnan Rahmin, predicted that demand for pulp and paper globally will continue to increase until 2015. “The growth will be accelerated by increase of demand in several countries, especially in China and India”, Kusnan said.

The satisfactory growth in pulp and paper demand, Kusnan said, will open an opportunity for Indonesia to become a global player by still prioritizing sustainable forest management, including focusing on analysis of High Conservation Value (NKT). “We have conducted NKT analysis since 2005”, said Kusnan. Kusnan added that RAPP has obtained SVLK certificate and Sustainable Production Forest Management (PHPL) certificate on plantation forest that has been managed by the company since 2010. Both certifications have proven that wood originating from plantation forest managed by RAPP is not only legal or valid, but it also originates from plantation forest managed sustainably”, Kusnan said.

Bambang Hendroyono, Director General of Forestry Business Development at the Forestry Ministry, said that SVLK was born because in certain period, illegal logging and trade of illegal timber is highly rampant so that foreign image about forest management in Indonesia is very bad. This is due to low welfare of the communities around the forests. This condition also causes competitiveness of Indonesia’s foreign products to become low. On the other hand, the international trend is proof of wood legality.

SVLK is a soft approach to illegal logging and illegal trade. It is a verification system arranged by multi stakeholders to ensure legality of source of wood circulating and traded in Indonesia. With SVLK, all government regulations concerning wood trading are implemented. SVLK proves that wood and wood products produced are derived from valid sources. Indonesia’s forestry administration is also improved. Competitiveness of Indonesia’s wood products is also improved. Illegal logging and illegal trading practices are minimized and community’s income is improved.

SLVK is the only wood legality verification system applicable in Indonesia. The benefit of holder of SVLK certificate is that he or she released from inspections that generate high-cost economy. SVLK’s principle is good management practices, representedness, and openness. Every timber that has obtained SVLK certification will receive a V-legal mark, Currently, it is still on trial stage, and it will be fully implemented in 2013.   

 Business News - September 7, 2012

  

   

MORE THAN 30 REGULATIONS TO BE AMMENDED FOR BETTER ASSURANCE TO BUSINESS PEOPLE

The Government planned to improve more than 30 regulations which were not environmental friendly for better assurance to the people. “The fearful thing to businesspeople is no assurance of project execution. This is what we will troubleshoot first, we will straighten things out” the Coordinating Minister of Economy Hatta Rajasa said upon closing the Indonesia International Infra-Stucture Conference and Exhibition in Jakarta on Thursday (30/8).

Beside improving Government’s regulations investment climate would also be made better through the application of Law and Presidential regulations on land acquisition for public utilities which were believed to bring assurance. “As soon as we announce the project, we know when acquisition would be accomplished. The Law commands that in a matter of days it should be completed even if the case has to be brought to the Supreme Court of Justice” Hatta underscored.

Furthermore Hatta remarked that of the so many Regulations, one of the regulations to be improved for drumming up investors was incentives. This incentives would be differentiated between regions well developed, less developed and undeveloped. For investors in corridor six corridor six for instance, greater incentives would be given since the infra-structure were less, etc.

Still in relation to incentives Hatta claimed that the Government was scheming up a plan to encourage the private sector to build infra-structure related to big incentives such as given in manufacturing development through PP. No. 62 year 2008. 

Business News - September 5, 2012

ECONOMIC REVIEW OF SEMESTER I AND ITS FUTURE PROJECTION

Indonesia’s economy through Quarter 2 grew by 2.8% which meant that over the first two quarters economic growth had reached 6.4%. This was indeed good news amidst global economic uncertainty and political and legal unrest at home lately.

Economic growth performance was sustained by investments amidst downturn of export performance. Naturally this should be perceived as good news to think that only yesterday there was growing anxiety over weakened export, but thankfully other sector as investment had proven itself as significant contributor to GDP.

The fact was that fear never materialized. So appreciation should be addressed to the economic team of the United Indonesia Cabinet Chapter II (KIB II) especially the Coordinating Board of Investment (BKPM) who had been able to jack up investment as the backbone of economic growth.

As known, lessened export was on account of declining economy in Europe and the USA. Interrupted economy in the two titanic regions had apparently made other parts of the world to turn feverish. In the past, many analysts and high Government officials cast aside any fear that the adverse condition in Europe and America would have any significant effect on Indonesia’s economy.

The reason was that the portion of Indonesia’s total export to Europe was not significant against total export. But perhaps they overlooked that soon or late, directly or indirectly, the feverish economy of America and Europe would lessen their demand from China and India. The implication was obviously that it would lessen demand from Indonesia. The transmission of crisis had apparently spread out through the financial line and international trading such it seemed, was the one thing not being watched on.

In an integrated world, a slight dissonance in one zone could, soon or late, vibrate to all over the world, only the gradation might differ. It should be borne in mind that Indonesia was not living in a vacuum space, where we were the only one is existence. It was just like living in a neighborhood when one of our neighbors were dengue-stung the chances of contamination to other neighbors were not small.

The monetary crisis of 1977 should serve as a mirror wherefrom lessons might be learned. It was a time when the value of Thailand’s Baht was corrected it instantly affected Indonesia’s currency, being crisis torn. That was known as the domino or contagion effect in economy.

Back to Indonesia’s economic structure. To rely on domestic consumption as fuel and propeller of the nation’s economic growth was not wrong indeed. Moreover with per capta income of the Indonesian people which reached USD 3,500 per capita per year means an enormous economic potential. The middle class emerging from high economic growth served as sustainer of consumption growth. That was the reason why Indonesia’s import was shooting up fast.

But one thing was to be watched over an economic based growth was a vulnerable thing because there was limit to it. Moreover the big cake of growth was not evenly and fairly distributed. Many economists rated that the economic growth being attained was of no high quality, with poverty figure standing out dishearteningly.

Rumors had it that the growth was only benefited by 20% of population. The biggest contributor to growth was the financial sector. Meaning, only the rich were enjoying prosperity. Even that already included the non-tradable sector which relatively had no impact on the process of employment and poverty elimination.

That was perhaps why the APBN budget increased. The GDP as criteria of economic magnitude continued to swell, while the nations debt expanded as well, and the nation’s debt kept pilling up but the population of poor people hardly inched down and the breed of the unemployed never shrunk. Those were the reason that made the Indonesia’s economic growth remain sullen, clumsy and vulnerable.

The fact strengthen cynical comment that Indonesia’s high economic growth was characterized by the problems of scarcity of soy, suger, rice, and meat. This truly ironic when it was happening in a country highly reputable as a fertile agricultural country time after time but always overshadowed by food crisis. And yet if the Government was committed an determined to realize the four pillars of development, i.e. pro-growth, pro-poor, pro-employment and pro-environment, the wolf at the door might simply go away unless the condition was deliberately made by the selfish who wish to benefit from it.

The Government may take pride in Indonesia’s economic growth which in the first Semester was posted at 6.4%. But as export dropped and import was soaring up, while budget absorption by ministries and institutions were not maximized, it seemed hard to chalk up economic growth in the second semester as in Semester one.

It seemed reasonable that many economists and analysts predicted Indonesia’s economic growth in Semester 2 would be only around 5.9% - 6.2%. To calculate by the year, Indonesia’s projected economic growth could only be around 6.0% to 6.3%. As domestic consumption was getting more limited, it was not easy to rely on investment as the backbone of the nation’s economy as other countries were just as aggressive in drumming up foreign investor the their country.

How about 2013? The RAPBN Sate Budget of 2013 was already announced, somehow the content of RAPBN itself was still a hot discourse in various circles of economists, analysts businesswold and academicians. For the most part they rated that the target growth of 6.8% set by the Government was over ambitious.

Even Chairul Tanjung, Chairman of the Committee of National Economy (KEN) felt that the target was something ‘extraordinary’ the point was that the target was set right at a time when Indonesia’s economy was problem-entangled. It seemed not an exaggeration that the comment made by the Chairman of KEN as a ‘subtle criticism’.

It seemed that Bank Indonesia themselves did not fully believe in the figure. Amidst economic downfall of Europe and the USA plus economic slowdown in China and India, who were Indonesia’s important trade partners would almost certainly have their negative impact on Indonesia. So BI was still thankful if Indonesia’s economic growth was above 6 percentile’s say 6.3% or 6.5% but to attain 6.8% it seemed difficult.

Business players were not less critical: they had their own view where even China who in the beginning was predicted to score two digit growth, only made 7.6% growth. Moreover this figure was predicted to even worsen in line with declining export of that country. For information, China’s export last July did not move an inch, i.e. stuck at zero percent.

Therefore if the world’s economy failed to improve significantly, it seemed impossible that Indonesia would attain notable growth as assessed in RAPBN state budget 2013. And if the condition in Europe and China were worsening extremely the World Bank predicted that Indonesia’s growth would be not more than 3.8% - 4%. So right was some people’s comment that the Government better be realistic and objective.   

Business News - September 5, 2012

PERFORMANCE GAP APPARENT BETWEEN PUBLIC SERVANTS AND BUSINESS PEOPLE

Ombudsman of the Republic of Indonesia (ORI) saw there was a performance gap between Government officials especially those related to public service and the business circles which had its negative impact on national economic development. To illustrate: if the speed and performance of the private sector had reached 100 percent, the speed of public servants was only half of it. i.e. 50 percent. This was a great challenge to state officials in the effort to step of reformation of the bureaucracy. “Businessmen clearly believe that time is money while public servants were often trapped in bureaucracy, in addition to the typical unresponsive attitude service problem” member of ORI Kartini Istiqomah told Business News sometime ago.

Due to the performance gap between the private sector and public servants, many business people choosed to take a shortcut to pay bribery; because the philosophy of time is money, businesspeople saw it that the money spent on bribery was worth all the expectations of good service. “Many businesspeople, even people of the lower-middle class when they apply for Identity Card (KTP), birth certificate, marriage certificate etc choosed to pay lubrication money at the service counters. That was what happened in the cas of bribery by Siti Hartati Budaya a reputable businesswoman and public figure who, in order to get quick service in permit application had to bribe the Regent of Buol in Central Sulawesi” Kartini was quoted as saying.

ORI saw that businesspeople and the private sector were not receptive to the slow service of public servants which caused lateness. Meanwhile businesspeople of big companies had systematic planning to develop their business. “I am not defending SHM, but she was not bribing because she did not use Government’s money. She was simply impatient with permit application procedures by Government officials, the Regent made things difficult and SHM was impatient. She could not stand to see slow serving officials and so she paid, but it’s not bribery” Kartini remarked.

Beside being slow in serving the businessworld, public servants were insensitive to the philosophy of public service itself; as known public complaints addressed to PRI was still around application for ID card, civil registrations etc. and apparently the lower middle class people were reluctant to apply for ID (KTP) etc. In some cases people come to apply when the deadline was over. When it was late, the process got even more difficult because they had to apply for the court. “When it’s too late, the procedure gets even more complicated”. Kartini said.

ORI saw the positive side of mass-marriage ceremony. The mass-marriage process would enable pairs to directly apply for marriage certificates to the Civil Service Dept in every province. If people were getting less aware of the importance of Civil Registration, they might tend to break public norms such as pre-marriage sex. “They have difficulty in applying for marriage certificates so the Government could not simply blame them as being moral breakers. Even if they were willing to apply, the price is high and they choose to go by their own way, to live together illegally” Kartini remarked.

Meanwhile Executive Director of NGO partnership Wicaksono Saraso pointed out that most of the Indonesian people were still paternalistic. Meaning, exemplary act was still important, so leaders in Government institutions were expected to set an example, whereby there would be tricke-down effect from the leader downward; thereby bureaucracy could be more slim and reduce practices of bribery or corruption. High officials of ministries, the police or the state, i.e. president if they set a good example it would motivate the people to follow the could be better especially in terms of public service, but it’s still a long journey”. Wicaksono disclosed to Business News sometime ago.

Meanwhile the Ministry of Empowerment of State’s Apparatus and Bureaucracy Reformation (PAN RB) saw that grand design and roadmap of reformation could still serve as guideline. The Independent Team of the Supervising Committee was striving to apply a more effective control system. The Ministry of PAN RB was highly expectant there would be lesson learned so the conference help a few days ago could give sound input for the acceleration of bureaucratic reformation (RB) process.

The conference involved the bureaucracy, academicians and condoler apparatus, the Government and students. “We agree to the idea that public service might speed up the process of national economic development” Gatot Sugiharto, Head of the Bureau of Law and Public Service Dept Ministry of PAN RB disclosed to Business News sometime ago. 

 Business News - September 5, 2012    

YSL drops 18-month Lawsuit against Christian Louboutin as both sides claim they won battle of the red-soled shoes

 

Yves Saint Laurent has dropped its lawsuit against Christian Louboutin, finally closing a drawn-out case over who owns red-soles, for good.

The most recent court decision satisfied the french fashion house, which allows YSL to make monochromatic red shoes, where both the soles and uppers are red.

However Louboutin's 2008 trademark protection over the red sole alone will continue to be upheld, a decision which lead YSL to cancel its six counterclaims against Louboutin.

In court documents filed Tuesday, YSL said it has decided that these claims are no longer worth pursuing thus resolving what remains of this litigation and allowing the parties to close the book on this litigation and refocus their attention on their respective fashion creations.

The case began in April 2011, when Christian Louboutin sued YSL for using red soles on the bottom of its red pumps.

Louboutin demanded $1million in damages, which was based on a trademark granted to Louboutin in 2008 for red soles.

Yet the case was subsequently referred to the appeals court after a New York district judge ruled that Louboutin had exclusive rights to red soles, but dismissed claims that YSL’s all-red shoes were an infringement of Louboutin’s trademark.

Last month, the case was mostly resolved when the Court of Appeals ruled that Louboutin’s trademark should not be enforceable on red-sole shoes with matching red uppers.

YSL filed a request to drop the rest of its counterclaims without prejudice against Christian Louboutin, according to a brief issued by YSL’s lawyer, David Bernstein.

Without prejudice means we have the right to re-file claims to cancel the trademark if Louboutin challenges us again with respect to our designs, he told WWD.

Both sides claim victory.

Louboutin’s lawyer, Harley Lewin, telling Reuters that the ruling enables the company to protect a life’s work embodied in the red sole found on his women's luxury shoes.

And in a statement released Tuesday evening, Louboutin added that the ruling reaffirm[s] the validity of our trademark rights on the red sole in the U.S. (which) deprived Yves Saint Laurent of its claim for cancellation of our trademark.

Mean, Mr Bernstein, YSL's lawyer, told WWD: Now that the Court of Appeals has definitively ruled for Yves Saint Laurent and has dismissed Christian Louboutin’s claims, Yves Saint Laurent has decided to end what was left of the litigation and refocus its energies on its business and its creative designs.

Christian Louboutin has applied glossy vivid red to its soles since 1992, the iconic shoes selling for upwards of $700 a pair.

Last year Louboutin sued lost a lawsuit against Spanish brand Zara after claiming that an open- toed red-soled shoe it was selling for £40 was similar to its Yo Yo style.

A French court ruled that Zara’s cut-price shoe could not be confused with that made by the high-end designer and the Cour de Cassation – the final court of appeal – upheld the decision.

By Daily Mail Reporter (October 18, 2012)

Read more: http://www.dailymail.co.uk/femail/article-2219103/YSL-drops-18-month-lawsuit-Christian-Louboutin-sides-claim-won-battle-red-soled-shoes.html#ixzz29cDFOCRy

FORESTRY AND PLANTATION COMPANIES URGED TO PREVENT FOREST FIRE

Forestry Minister, Zulkifkli Hasan, appealed to the society to increase alertness to forest fire as the recent dry season is drier than normal. He urged companies utilizing land, like forestry and plantation companies, to help prevent land fire. According to the Forestry Minister, there are habits of the local communities during the dry season that must be given up, including burning land clearing debris.

Around 80% of fire occurs outside forest are and only 20% occurring in forest area, which is the jurisdiction of the Forestry Minister. According to the Minister, for fire prevention, his party relied on Manggala Agni (Forest Fire Brigade) which is equipped with modern equipment. Yet, however, support from the society at large, including land management companies, is required to prevent land fire. It is difficult to handle fire. Therefore, preventive action must be prioritized he said.

Director General of Forest Protection and Nature Conservation, Darori, said that forest management companies, such as forest concession (HPH) and industrial forest (HTI) concession holders are ready to prevent forest fire. He expected that plantation companies will do the same. HTI management companies in general have had a very good equipment to prevent forest fire. We expect that plantation companies will do the same, he said.

According to Darori, to increase alertness to land fire, the Forestry Ministry will hold apel siaga (call for readiness) in Pekanbaru, Riau on September 6, 2012. Based on records of the Forestry Ministry as stated in indofire.org website, since January 1 to August 26, 2012, there are 29,731 hotspot points monitored. In the same period of 2011, 18,146 hotspot points were monitored, it means that there is increase in the number of hotspot points by 2,585 (14%) this year.

Director of Perennial Plants of the Directorate General of Plantation at the Agriculture Ministry, Rismansyah Dansaputra, said that based on the prevailing legislation, plantation companies are required to have forest fire prevention and forest the extinguishing equipment. But, this is frequently ignored.

This is proven when a company is conducting Indonesia Sustainable Palm Oil (ISPO) certification. Many plantation companies spent a large amount of money to obtain ISPO certificate as they must equip themselves with new fire extinguishing equipment. While in fact, according to the legislation, since the beginning of investment, fire extinguishing equipment must already be available, he said.

President Director of PT Riau Andalan Pulp and Paper (RAPP). Kusnan Rahmin, said that his party is committed to perform no-burn forest management. This is a proactive initiative by integrating fire prevention management and minimizing fire potency in an integrated sustainable wood planting system.

RAPP has invested in no-burn forest management equipment and fire prevention training. We also conducted training of the local community on fire prevention methods and launching no burn policy campaign, Kusnan said. He also explained about a serious threat that causes forest fire, which is land conversion conducted by irresponsible parties during land opening. In facing this threat, Quick Response Integrated Team of RAPP is conducting an intensive control over fire threat and operating land and air patrol to respond to fire.

We have become a member of the Fire Management Actions Alliance coordinated by FAO since May 2007. RAPP has also formed Masyarakat Peduli Api (Fire Care Community) around concession area, including infrastructure assistance and training to develop care to fire threat, he said.

Joko Supriyono, Director of PT Astra Agro Lestari, Tdk, said that all Astra’s oil palm plantations have been equipped with fire trucks. And, non-burn land opening has become a common norm in large scale oil palm plantation companies. 

Business News - August 31, 2012