Is Someone Trying to Bring the House Down?  NEW INCOME TAX LAW [Archives:1998/47/Business & Economy]

November 23 1998

There is something cynical and even evil in the new amendments proposed on income tax law number 31 of 1991, which parliament is now discussing. In part, this proposal is motivated by the drive of the government to boost its revenues, as projected in the 1999 budget.
The main affected sources of income are salaries and other payrolls, revenues from rented real estate, profits from commercial and industrial activities.
With respect to taxes on payroll, the new law will basically double government revenues. In its drive to tap into this goldmine, the government is proposing to increase the top bracket of tax on payroll from its present 16% to a hefty 35%. The bait is supposed to be raising the minimum non-taxable income from YR 2,000 to YR 4,000.
In a country that collects less than 50% of its tax dues, payroll taxes are the best collected – reaching up to 82% of the total base. Thus, the new law will lead to more than doubling of government revenues from this source.
The law proposes to actually reduce the top bracket on commercial and industrial profits from its present 35% to 30%.
The negative implications of this step on the living standards on the low-income and middle income people, such as government bureaucrats and clerks working for the private sector is visible. Apparently, the government and law makers are not listening to the general mood of an already impoverished and aggravated poor class.
If the government is interested in increasing its revenue base, as it should be, it should tap into the wealth being accumulated by the well-to-do members of our society, especially those who have not earned it.
Another source to tap would be the massive smuggling operations which are carried out under the eyes and noses of everybody. But then again, the government is not interested in confronting powerful groups. But it can push around the voiceless majority – only for a time.