Laying groundwork for change in the tax office<\/p>\n
Rendi A. Witular, The Jakarta Post\/Jakarta<\/p>\n
Despite all the efforts to promote good governance at tax offices
\nlast year, the Directorate General of Taxation has failed to
\naddress taxpayers' greatest concerns: the uncertainty over tax
\nlaw enforcement, and corruption within the office.<\/p>\n
Sofjan Wanandi, businessman and chairman of the Indonesian
\nEconomic Recovery Committee (KPEN), said there had been no
\nsatisfying progress in the country's overall tax administration
\nin 2004 as far as corruption was concerned.<\/p>\n
\"Nothing changed; the tax office remains a haven for
\ncorruptors and leakage of potential tax revenue for the state is
\nhuge and unacceptable\" said Sofjan, who is also chairman of the
\nIndonesian Employers Association (Apindo).<\/p>\n
Corrupt taxation administration has led to poor tax law
\nenforcement and low tax collection, he said.<\/p>\n
Despite these serious concerns, there were nonetheless a
\nnumber of efforts made by the government and the tax office that
\nmay lay the foundation for better tax administration in the
\nfuture.<\/p>\n
Among the efforts was the initiative taken by the
\nadministration of former president Megawati Soekarnoputri to
\nrevise the tax laws.<\/p>\n
The revision of the tax laws, which was part of the
\ngovernment's key economic reform measures after \"graduating\"
\nfrom the International Monetary Fund's bailout program, is aimed
\nat boosting tax revenue and compliance.<\/p>\n
The intentions are good and welcome by many parties, but there
\nare several articles in the draft revision that have sparked
\noutcry from the local business community and from foreign
\ninvestors.<\/p>\n
Among the controversial articles is a plan to give greater
\npower to the tax office to detain taxpayers without trial for any
\nviolation of tax law, and to impose tough sanctions on taxpayers
\nfor a range of small violations.<\/p>\n
The business community are concerned that such regulations
\ncould further encourage extortion and collusion, and be used by
\nthe numerous unscrupulous tax officials as another weapon to
\nfleece taxpayers.<\/p>\n
In response to protests, Megawati postponed the revision of
\nthe tax laws. The new government under President Susilo Bambang
\nYudhoyono, who was sworn in last Oct. 20, has decided to resume
\nthe revision and to accommodate the concerns of the business
\ncommunity.<\/p>\n
Learning from past mistakes, the current government has
\npledged to revise the laws with the primary aim of not only
\nboosting tax revenues, but also in combating corruption at tax
\noffices. However, until now the new revision has not been
\nfinalized.<\/p>\n
Another important event this year was the filing of a petition
\nby a businessman challenging the tax office in the Constitutional
\nCourt.<\/p>\n
This indicates that the business community, who are generally
\nfearful of arguing with tax officials and would rather compromise
\nin case of disputes in order to protect their businesses, are now
\nmore aware of their rights, and have more courage in facing off
\nwith tax officials -- something that corrupt tax officials should
\nnow take seriously.<\/p>\n
The Constitutional Court is currently examining a petition
\nfiled by businessman B.Q. Vega to review the legality of the tax
\ntribunal law, which it said had created unfairness and a lack of
\nlegal certainty for the business community.<\/p>\n
Vega said he decided to go to court after falling victim to
\nwhat he described as \"unscrupulous behavior\" by tax officials,
\nwho used the tax tribunal as a tool for extorting taxpayers.<\/p>\n
The tribunal will be abolished if the Constitutional Court
\ndecides to overturn the law. This, analysts say, will pave way
\nfor the establishment of an independent tribunal under the
\nauspices of the Supreme Court.<\/p>\n
At present, the tax tribunal is considered by many taxpayers
\nto be an unfair institution because it often takes side with the
\ntax office. This is probably understandable given that it is
\nunder the auspices of the Ministry of Finance, and all its judges
\nare selected and paid by the ministry.<\/p>\n
Another effort to reform the nation's tax system is a plan by
\nseveral high-ranking tax officials to turn the tax office into an
\nindependent agency, separate from the Ministry of Finance. This,
\nthey said, will allow tax officials to focus on collecting taxes
\nand enforcing tax laws.<\/p>\n
The plan comes amid concerns that the directorate could not
\nconcentrate on its tasks because it has also has to carry out
\nother jobs unrelated to tax collection and tax law enforcement,
\nsuch as making tax regulations. This, they said, should be
\nperformed by other agencies.<\/p>\n
The plan, however, was rejected by former Minister of Finance
\nBoediono because of fears that the government could not
\neffectively control the tax office, and that it might affect tax
\ncollection at the time the government really needed additional
\nrevenue from taxation.<\/p>\n
Director General of Taxation Hadi Purnomo told The Jakarta
\nPost recently that he could not accept any opinion charging that
\nthere had been no reform at his office, citing several
\n\"successes\" that had been made in improving tax service and
\ncollection this year.<\/p>\n
\"It is unfair to say that there has been no improvement at
\nall. We have modernized our tax system by implementing an online
\nsystem and have expanded the tax administration system adopted by
\nthe Large Tax Office (LTO) to a number of other tax offices,\"
\nsaid Hadi.<\/p>\n
The LTO, which was established in 2003, is the directorate's
\npilot project for a clean, modern and professional tax collection
\nsystem.<\/p>\n
The office is manned by well-trained, highly-paid tax
\nofficials, each of whom focuses on certain taxpayers. Each of
\ntaxpayer will thus have their documents taken care of by
\nofficials specially assigned to them. The LTO is also equipped
\nwith a complaint center.<\/p>\n
With the LTO, the tax office aims to give better and faster
\nservice to taxpayers as well as providing faster solutions in the
\nevent of disputes.<\/p>\n
The LTO has received a warm reception from large taxpayers as
\nit is considered effective in preventing backroom deals among
\ntaxpayers and tax officials.<\/p>\n
Last year, the directorate started expanding the \"LTO system\"
\nto other tax offices in Jakarta. But so far the service is only
\nprovided to big corporations.<\/p>\n
Hadi added that the directorate had also initiated the
\nestablishment of a database of potential taxpayers, and the
\ncreation of single identity number so that the tax office could
\nmore easily track taxpayers.<\/p>\n
\"The database is expected to be used to cross-check taxpayers'
\nreported tax bills with data gained by the directorate from
\nvarious other sources,\" said Hadi, adding that the directorate
\nhad reduced corrupt practices at tax offices by setting up online
\npayment and tax bill filing systems.<\/p>",
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