Ready to Be Knocked! Jokowi Revamps Total Regional Tax-Retribution

Jakarta, CNBC Indonesia – The Draft Law on Financial Relations between the Central and Regional Governments (RUU HKPD) was approved by Commission XI of the DPR to be brought to the plenary session of the DPR RI.

This was conveyed directly by the Chairman of the House of Representatives Commission XI Dito Ganinduto during a meeting with the government in the House of Representatives Commission XI room, Tuesday (23/11/2021).

“We are now taking the decision to discuss the second level of the HKPD Bill. Is it acceptable? Agree?” he said and was answered “Agree” by other members of Commission XI of the DPR.

Finance Minister Sri Mulyani Indrawati explained that the HKPD Bill was a bill designed based on the evaluation of Law Number 34 of 2004 concerning Financial Balance between the Central Government and Regional Governments, as well as Law no. 28 of 29 concerning Regional Taxes and Regional Levies.

This bill, said Sri Mulyani, is expected to come at the right time to become an important instrument for fiscal consolidation.

Sri Mulyani said the HKPD Bill was related to Law No. 7/2021 on the Harmonization of Tax Regulations (HPP).

According to him, the HPP Law is the government’s effort to increase the tax ratio which will also be felt by the regions in the form of transfer funds. The same spirit also applies to the HKPD Bill.

“The HKPD Bill is an effort to increase the tax ratio at the regional level, especially in order to increase regional independence,” he said on the same occasion.

Sri Mulyani detailed that the HKPD Bill would consist of four pillars, namely matters of taxation, simplification of regional levies, regional expenditures, to fiscal synergy between the government and the center.

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Specifically on the simplification of regional levies, Sri Mulyani said the government would cut the number of types of regional taxes and levies.

According to the plan, local taxes will be reduced from 16 types to 14 types. Meanwhile, regional levies from 32 types to 18 types.

Although the number of types is reduced, the former Managing Director of the World Bank is sure that this will not reduce the pocket of tax and levy revenue for local governments.

In addition, the cuts, he said, also aim to provide tax certainty, so that investors are willing to invest in the region. As for spending, some programs will also be reduced.

“The number of retributions and local taxes that are smaller does not mean that regional revenues will fall, in fact, revenues from regencies/cities can increase using the 2020 baseline, up to 50%,” he explained.

“The government wants a simplification of the program but this does not reduce what is called regional autonomy because we see that hundreds of programs are actually detrimental to the people who want to be served. So it is better to make it as efficient as possible,” he said again.