New Government to Initiate Talk on Directorate General of Tax

TEMPO.CO, Jakarta - The proposal to separate the Directorate General of Tax from the Finance Ministry (Ministry) will be discussed in the next government. "Because [the separation] implication is huge," said Finance Minister Muhamad Chatib Basri, as quoted by Antara, last Wednesday.

According to Basri, the discussion to establish a new tax agency takes a long time because in order to separate the Directorate General of Tax from the Ministry, laws must be changed. "Changing the laws need more than just three months. This is from a legal perspective,” he said.

Chatib also said that the separation must involve lengthy consideration because tax mechanism in Indonesia is different from other countries. As an example, Chatib explained that the Internal Revenue Services, which is the United States federal agency that collects tax and determines the domestic revenue law, is not involved in making taxation policies.

"Because IRS' tasks are only to collect tax and work with legal institutions to take legal actions if there are people avoiding paying taxes," said Chatib. On the other hand, he said that the Directorate General of Tax in Indonesia must work to meet a tax revenue target set by the government.

He further explained that the tax revenue target is set by the House of Representatives based on the State Finance Law, which regulates that the amount of budget deficit must not exceeds three percent. Chatib expressed his concerns that if the Directorate General of Tax is instructed specifically only to collect taxes, budget deficit can go above the three percent limit.

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