On Local Tax Law

The newly approved Local Tax Law stipulates the following 5 taxes allowed for provincial governments: vehicle tax, vehicle title-transfer tax, vehicle fuel tax, surface water tax, and cigarette tax. As many as 11 taxes are allowed for district/city governments: hotel tax, entertainment tax, advertisement tax, street-light tax, non-metal mineral tax, parking tax, ground water tax, swallow-nest tax (!), building and property tax, land and building rights entitlement tax (for lack of better translation). The law also allows 30 kinds of 'retribution' (user charges), grouped into 3 types: general service retribution (eg marketplace services), business service retribution (eg terminal and auction place services), and specific licence retribution (eg route permits). Finally, there is a progressive tax on second or more vehicles (with a tariff from 2 to 10 percent).

The above is based on a column by Harry Aziz, Bisinis Indonesia, 24/8). The author was the head of special committee for the draft, from the House side. He mentions that the reasons for progressive tax on vehicles are: inelatic demand of vehicles (I wonder what hi numbers are), fairness principle, local competition principle. He also adds that the collected tax should be earmarked to local infrastructure development. A tall order indeed.