Associated Press November 6, 2000

E Timorese To Pay Income Tax

DILI, East Timor (AP)--For the first time since East Timor broke free from Indonesian occupation last year, wage earners in the territory will have to pay income tax, according to a draft law introduced Tuesday.

A bill to introduce the income tax and increase excise rates on luxury goods was being discussed Tuesday by the National Council, the territory's U.N.-run government that is administering East Timor during its transition to full independence.

U.N. finance adviser Michael Francino predicted that the new tax system would generate an $3 million in the current fiscal year.

Some of the revenue raised would be directly injected into East Timor's $59.4 million 2000-2001 budget.

Officials said part of the funds will be used to set up an East Timor Defense Service and to recruit 600 regular soldiers - mainly former freedom fighters - into the fledgeling army.

According to the proposal, the basic income tax rate would start at 10% for those who earned between $100 and $650 per month and would rise to 30% above $650.

The U.N. estimates more than 75% of East Timorese of working age remain unemployed after retreating Indonesian soldiers and their auxiliaries devastated the territory last year.

The bill would also increase taxes on luxury goods. Alcohol and cars would be the hardest hit items.

East Timor's main export crop, coffee, would also be slammed with a 5% export tax.

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