ACCEPTANCE OF STATE: ENTREPRENEURS REJECTED INCOME TAX

JAKARTA - The government plans to impose taxes on retained earnings and inheritance rejected by business people because it is considered to be counterproductive with efforts to create a more conducive business climate. (Apindo) Siddhi Widyaprathama said the plan on taxation of retained earnings illustrates that the government is only able to intensify taxes, without extending the tax base itself.

"The government should focus on extensification rather than intensification, because this is taxed the subject again, that's again," he said.

Siddhi explained, as long as the corporate wheel is still running, retained earnings will be pressed down to the lowest level. "Retained earnings are not always in the form of cash, can already be transformed into inventories, fixed assets, accounts receivable, rarely there is a significant amount of cash."

Therefore, he considered the plan to levy taxes from retained earnings is very irrelevant to the real state of Indonesian corporations.

Chairman of the Association of Indonesian Retail Entrepreneurs (Aprindo) Roy Nicolas Mandey explains, the corporation has a very strategic goal in determining the amount of retained earnings. That is, retained earnings do not necessarily mean that the corporation hold it for lazy investing.

"The retained earnings are for reserves, for next year's expansion, or as an accumulation so that next year's dividends will be bigger, and certainly, there is a company policy in it," Roy told Bisnis on Monday (9/7).

On the other hand, Vice Chairman of the Indonesian Chamber of Commerce and Industry (Kadin) Shinta W Kamdani admitted quite worried about the plan, because it is potentially to repatriate retained earnings owned by foreign corporations in Indonesia.

In fact, according to him, the rule has the potential to encourage domestic capital owners to invest their capital abroad, simply because they do not want to be taxed domestically. "In an economic situation like this is not very conducive," said Shinta.

Managing Director of Sinar Mas Group Gandi Sulistyo said that in the current regulation, the tax is only charged to net income that has been distributed into dividends. Ideally retained earnings devices are not taxed.

"Profit is withheld if it can not be taxed. If it can [tax] imposed on the profit that has been distributed to dividend, "said Gandi, Monday (9/7).

A similar attitude was expressed by bankers. Finance Director of PT Bank Negara Indonesia (Persero) Tbk. Anggoro Eko Cahyo said the government should consider that retained earnings come from bank profits that have been taxed. If there is an additional tax, there will be double taxation from the same source of income.

He said the government should also consider its impact on highly capital intensive industries such as the banking industry. The policy is feared will have an impact on the ability of banks in lending.

"The ability of banks to distribute credit will certainly be eroded and eventually the role of banks as an agent of development of economic growth will be not maximal," he said, Tuesday (10/7).

President Director of PT Bank Central Asia Tbk. Jahja Setiaatmadja said the plan could not be implemented. "That's a new discourse, guaranteed not to be. That accounting is indistinguishable, the retained earnings are part of the liability, the share is retained earnings, there is a loan, it is blended so one can not be sorted so, "he said.

Responding to business complaints, Directorate General of Taxes Ministry of Finance Robert Pakpahan said that the plan for appropriation of retained earnings and inheritance did appear in the forum group discussion (FGD).

"But this discussion is still too early, not yet at the leadership level," said Robert in Jakarta, Tuesday (10/7).

Robert was reluctant to disclose details about the plan. However, the government will listen to input from the parties regarding the imposition of retained earnings tax and inheritance. "It's very sensitive. Because it is still FGD, yes it is still very early, "he added.