Novice Nation Urged To Embrace Taxation By Mark Dodd

05/19/2000 Sydney Morning Herald

Impoverished East Timor is considering the introduction of a broad-based taxation system at the urging of the United Nations, which wants to ensure the world's newest country achieves a measure of economic self-sufficiency before it leaves.

Members of the National Consultative Council (NCC), East Timor 's de facto government, and senior UN officials met in Dili for the first public hearing on the taxation proposals on Wednesday.

The proposal is being considered by the NCC, which will either reject or ratify it.

The tax measures, if adopted, would affect all companies and wage-earners doing business in East Timor .

UN international staff, the highest paid workers in East Timor , and aid agency personnel would be exempt from paying income tax.

Under the plan, which would take effect from August 1, local and foreign workers would pay no tax on the first $US600 ($1,050), but a flat rate of 20 per cent would apply on wages above that amount.

The tax system would be introduced in various stages. A senior UN Transitional Administration in East Timor (UNTAET) financial official, Mr Bruce Taplin, sought the introduction of a 10 per cent tax on hotels, cafes, telecommunications services and rental services by July 1, but requested it be back-dated to January 1.

Other taxes planned by UNTAET include a land and property tax, business income tax and withholding taxes on business.

Representatives of foreign companies said at the hearing they accepted a tax liability in East Timor but wanted more details before making a detailed response.

Most companies doing business in East Timor are Australian-owned and include Telstra, which would be liable for the services tax.

The land tax would apply only after a comprehensive registry of land ownership in East Timor , which the UN concedes is a contentious issue yet to be resolved. ``Determining the ownership of land at this time is rather difficult,'' Mr Taplin said.

Documents prepared by UNTAET projected tax revenue of $US22 million for the financial year 2000/2001 if the proposed measures were adopted in their present form.

By 2002/2003, East Timor 's revenue forecast would increase to $US43 million, compared with an estimated $US1 million expected this financial year.

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