World Bank gives loan to RI to improve tax systems

The Jakarta Post, Jakarta | Mon, 01/19/2009 5:43 PM  

The World Bank, one of the country's major donors, has approved a US$110 million loan to the Indonesian government to help it improve taxation systems. 

The soft loan was approved and announced from Washington last week, a media statement said. 

"Indonesia has already embarked on a major effort to reform its system of collecting tax revenues, most notably by revamping the directorate general of taxation, introducing modern compliance management systems, and passing the Tax Procedures Law in 2008," the Bank's country director for Indonesia, Joachim von Amsberg said in the statement. 

The Finance Ministry's directorate general of taxation performed surprisingly well last year, persuading over 3 million people to register for their tax number (NPWP) and making a surplus of Rp 37 trillion in tax revenues, or 106 percent more than the planned state budget. 

The tax office succeeded by launching massive tax campaigns and offering numerous incentives to people with an NPWP, including exemption from the Rp 2.5 million (US$227) exit tax for overseas travel and amnesty from administrative fines for tax return adjustments for 2007 and earlier. 

It began its tax reform efforts in 2001, with a strategy aimed at: promoting voluntary compliance among taxpayers; increasing the efficiency of administration; and restoring taxpayers' confidence in the fairness and integrity of tax administration. 

The office also runs other programs, such as taking over workers' tax liabilities for companies hit hard by the crisis in order to stimulate economic growth, the Finance Ministry's directorate general for taxation Darmin Nasution said. 

According to von Amsberg, the $110 million loan aims to help the office embark on an even more progressive reform in tax administration through a project called the Project for Indonesian Tax Administration Reform (PINTAR). 

"Through PINTAR, the World Bank sets out to complement this effort by helping the Indonesian Government expand tax bases, both in terms of increasing the number of tax payers and of transactions coming into the tax system, which would in turn help generate more non oil and gas tax revenue," he said. 

The PINTAR program will help increase the directorate general's tax efficiency and capacity, he added, through improved administrative systems, advanced training of human resources and better management. 

"Through strengthened staff capacity, integrity standards and a more service-oriented approach, PINTAR will enable better taxpayer services reducing compliance costs for the private sector," said World Bank senior public sector specialist and project team leader, Jens Kromann Kristensen. 

He added a modern integrated IT system will also help raise productivity and facilitate information exchange across the Directorate General of Taxation. (dis)