Distrusted taxpayers<\/p>\n
After more than a decade of impressive achievements in the tax
\nsystem, as indicated by the significant broadening of the tax
\nbase and the annual average increase of 24 percent in tax
\nreceipts, we were surprised to learn that tax assessment is now
\nthe biggest problem faced by foreign businessmen in Indonesia.<\/p>\n
Most of the around 75 foreign businessmen attending the
\nEconomist Conferences' Roundtable with the Indonesian government
\nin Jakarta last week complained about heavy-handed treatment by
\ntax officials. They alleged that tax officials never believe
\ntheir tax assessments and that the T-men always make their own
\nassessments with which to force individual negotiations. That has
\ncaused uncertainty about tax liability.<\/p>\n
We are fully aware that no tax system in the world is simple
\nor easy to comprehend. That is why, in the first place, the
\ngovernment totally reformed the tax system in 1983 and introduced
\ncompletely new laws on general tax administration, income, value
\nadded and property taxes. All agree that the new laws, which were
\nfurther amended early this year, are much less complex and easier
\nto comprehend. The laws also minimize exceptions and reduce the
\nscope of discretionary bureaucratic judgment.<\/p>\n
Another most outstanding element of the new tax system is the
\nself-assessment principle to replace the previous one whereby tax
\nliabilities were assessed by tax officials through direct
\nnegotiations with the taxpayers.<\/p>\n
The self-assessment system is supposed to minimize direct
\nnegotiations between the taxpayers and tax officials. Obviously,
\nas Tax Director General Fuad Bawazier has often asserted, the
\nself-assessment system is not a permit for taxpayers to assess
\ntheir tax liabilities however they wish.<\/p>\n
Nonetheless, the puzzling question raised by the foreign
\nbusinessmen's complaints is: Why tax officials approach those
\nforeign corporate taxpayers with such distrust.<\/p>\n
True, as Fuad has argued, not all businessmen are honest about
\ntheir tax assessments. But we believe that foreign companies,
\nmany of which are units of multinational corporations, should be
\nmore capable of assessing their tax liabilities as their books
\nare usually audited by major accountancy firms with international
\nreputations. Moreover, they always have highly skilled tax
\nconsultants on their staff. In fact, we should magnanimously
\nacknowledge, that tax compliance among foreign companies is much
\nhigher than that among domestic firms whose financial accounts
\nare often questionable.<\/p>\n
Part of the problem, we think, is that the self-assessment
\nsystem has not yet been supported by a reliable data network or a
\ncomputerized information system which enables tax officials to
\ncross-check the data of taxpayers. Part of this problem is being
\naddressed with guidelines from the central bank and tax
\ndirectorate general which requires borrowers
\napplying for bank loans of more than Rp 30 million to support
\ntheir applications with copies of their annual income tax returns
\n(assessment forms). But the process of building up such a
\nreliable computerized data system will require a long time.<\/p>\n
The other problems are the difficult, arduous process of
\nobjection and appeal in cases of disagreements between the
\ntaxpayers and tax officials. This hurdle often prompts taxpayers
\nto opt for \"negotiations\" with disagreeable tax officials.<\/p>\n
But another problem which is actually inherent within the
\nwhole bureaucracy, due partly to the extremely low pay of civil
\nservants, is the inadequate supervision of officials that makes
\nit much easier for corrupt and recalcitrant officials to evade
\ndetection and punishment.<\/p>\n
The tax directorate general indeed is still faced with the
\nformidable task of not only collecting a steadily larger amount
\nof revenue for the state budget but also improving its
\nadministrative capability by increasing the number of skilled
\nadministrators and auditors. As if that is not enough, the
\ndirectorate general is also coping with the delicate task of
\nimproving the integrity of its poorly-paid personnel who, due to
\nthe characteristic of their job, constantly face great
\ntemptation.<\/p>\n
We think the tax directorate general, being faced with so many
\nformidable challenges, should set a better set of priorities for
\nchecking and auditing taxpayers to achieve the maximum result.
\nBut we believe foreign companies should not be on top of its list
\nof priorities.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/distrusted-taxpayers-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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