Nana, who works in an Oil and gas company in South Sumatra, had to report her employers tax dodcuments to two agencies under one banner—the central and regional tax offices—starting last February.
Nana, who refused to disclose her real name, knew that it was a waste of time and that it would be a hassle. However, she decided to comply as a sanction of fines haunted her.
“In the beginning, we only had to report our property tax [PBB] to the regional [tax office]. However, three months ago, we received a letter telling us to also report our income tax, which we’ve already sent to the central [tax office],” she told The Jakarta Post recently.
Her friends, who work in a joint venture company with a state-owned firm, have given up and decided to comply with the order, despite the nuisance.
“My other friend ran out of luck. [The company she works for] must pay a fine because the regional tax office claimed the company had not paid taxes,” Nana said.
Two decades after Indonesia’s decentralization, the country still sees problems related to overlapping regulations between the central government and local administrations, creating an atmosphere of uncertainty for investors, including those in the oil, gas and mining industry.
Nana’s problem is one of the real-world examples of overlapping regulations, which President Joko “Jokowi” Widodo has repeatedly said hampered investment in the country
Last November, Jokowi issued a presidential instruction (Inpres) that requires ministers, high-ranking officials and heads of non-ministerial institutions to report any new regulations they want to issue to the relevant coordinating minister’s office and/or the President in a bid to avoid overlapping regulations.
Investment Coordinating Board (BKPM) head Thomas Lembong previously said the Inpres was issued because ministries and other institutions had failed to coordinate when they issued regulations.
Canadian think tank Fraser Institute recently ranked Indonesia as the 10thleast attractive jurisdiction for investment based on policy perception ranking. In 2017, Indonesia ranked of 84th out of 91 countries surveyed.
Center for Taxation Analysis (CITA) tax expert Yustinus Prastowo urged the government to immediately address the country’s regulatory uncertainty, with various regulations overlapping between central and regional levels.
“The problem usually lies in the working contract, wherein the mining or oil and gas company and the government agree that there would be no regional taxes,” he said.
“But the local administration can overrule the contract and apply taxes using the regional autonomy regulation,” Yustinus added.
The regional autonomy regulation grants the local administration the right to impose taxes in their territory to increase income.
One of the cases that Yustinus highlighted was PT Newmont Nusa Tenggara (NNT) — the local unit of United States mining giant Newmont Mining Corporation — which was ordered by the West Nusa Tenggara administration to pay vehicle ownership tax in 2014 and 2015.
NNT had argued that a working contract with the central government agreed that the taxation imposed on the company would follow the contract and not the taxation bylaw.
Hence, disputes between the local administrations and the business players are inevitable, because both have their own legal basis, said Yustinus.
“The occurrence of these situations also implies a lack of understanding of the national fiscal policy at the regional level, or you can say a lack of supervision from the top management,” he added.
Budi Ernawan, Home Ministry head of regional revenue for Kalimantan province, a region home to many coal mining areas, concurred that a lack of understanding on national fiscal policy might have disrupted the ease of doing business in the region.
“The one example that I have to use is the game SimCity to illustrate to the regional staff that when tax is higher, investments also decline,” he said.
Source: Stefanno Reinard Sulaiman / The Jakarta Post
14 May 2018