TEMPO.CO, Jakarta - In the practice of governance, there is almost always a wide gap between aspiration and reality. If it is not an illusion, any government plan must still be based on thorough research and calculations so it can be properly implemented and this is often not easy. Matters become even more complex if the aim is justice.
This is true of the government's plan to impose progressive taxation on idle land. The plan, which according to Agrarian and Spatial Planning Affairs Minister Sofyan Djalil, is still under serious consideration, is aimed at preventing land prices soaring as a result of speculation. With this tax, the government hopes that people who need land will still be able to afford it, while the state will not lose out in terms of tax revenues.
It is difficult to disagree with those who take the view that the proposal behind this plan is a good one, and is needed. The problem is the significant chance that this new tax on fallow land could become counterproductive, causing property value to rise significantly, slowing economic growth and possibly even becoming a political burden. To prevent the implementation from going astray and leading to new injustice and chaos, the government should act wisely and anticipate the consequences.
Thinking about the regulations and optimal tax rates as well as the taxation scheme, whether it should come under income tax or land and buildings tax, is an important part of realizing this plan. But the government also needs to consider another fundamental aspect, which if overlooked, can throw the implementation into chaos: how to identify land categorized as idle or fallow.
The need for careful identification on the status of land has been expressed by businesspeople in the property sector. In general, they have no objection to the government's plan. While waiting to hear the details, they have called for clarity in differentiating between the status of land from the point of view of developers and speculators.
From the aspect of business, developers need land to build on, not simply to make a profit from. They follow lengthy and often tortuous procedures in order to obtain or clear land related to location permits, spatial planning and so on. They then have to build local infrastructure and allocate 40 percent of the land for public and social facilities.
Speculators, as they have operated and are defined, do not have to go through any of these costly stages. They obtain land without any clear plans for building, let alone provide infrastructure. It is highly likely they do not apply for any permits. After taking control of the land, they simply leave it and wait for the value to increase before deciding to sell.
Clear criteria are needed to distinguish the kinds of land ownership for these two quite different purposes. The government could ask for suggestions from representatives of the developer industry, such as Realestat Indonesia. The right input, not simply lots of it, is needed to produce a policy that is right and regulations that are clear. This would ensure that the aim of overcoming inequality and bringing about justice does not lead to unease and disruption. (*)
Read the full story in this week's edition of Tempo English Magazine
