Tax uncollected<\/p>\n
Taxation Director General Hadi Purnomo's estimate of Rp 676.5
\ntrillion (US$74.34 billion) in potential tax revenue lost
\nannually during the past three years seems to be too high -- a
\nsum 240 percent larger than the Rp 272.17 trillion tax receipt
\ntarget set for this year.<\/p>\n
This is not, however, to deny the blunt truth that tax evasion
\nhas always been pervasive in this country, as can be noted from
\nits tax ratio (tax receipts as a percentage against gross
\ndomestic product) of only less than 13 percent, compared to
\nbetween 17 and 20 percent in other ASEAN countries.<\/p>\n
Most analysts and tax auditors have estimated that tax
\ncollections in Indonesia have remained small in proportion to the
\npotential revenue, or only around 50 percent of corporate and
\npersonal income tax and 55 percent of value-added tax.<\/p>\n
The main reasons behind the high incidence of tax non-
\ncompliance have often been cited. Among them are the small chance
\nand low cost of being caught, collusion with corrupt tax
\nofficials and the inadequate number of competent tax auditors.<\/p>\n
However, Purnomo, speaking at a seminar on Tuesday, cited
\nanother major factor behind the pervasive tax evasion. He said
\nmany laws and regulations severely restricted the access of tax
\nofficials to records of financial transactions, which had
\nenormous potential tax revenues.<\/p>\n
He said the government could in theory collect annually Rp 252
\ntrillion in tax receipts from bank deposits, Rp 243 trillion from
\nforeign exchange transactions, Rp 180 trillion from bad loans and
\nRp 1.5 trillion from credit cards. But these potential tax
\nrevenues cannot be collected because tax officials are unable to
\ncheck the records of financial transactions.<\/p>\n
The tax chief seemed to be frustrated about the acute lack of
\ncooperation on the part of other government institutions with
\nregards to the tax officials' access to verify taxpayers'
\nfinancial records.<\/p>\n
Although access to records of financial transactions may
\nsometimes be meaningless in a country where documents or records
\ncan so easily be falsified, Purnomo did have a legitimate point.<\/p>\n
Large sums of additional tax revenues, whether from income,
\nvalue-added or property taxes, could have been collected had tax
\nofficials had a broad authority to corroborate or cross-check
\nrecords on taxpayers.<\/p>\n
For example, taxpayers may understate their taxable income
\nwith fake documents. However tax officials can still uncover tax
\nunderpayment by verifying the taxpayer's records of electricity
\nor phone bills, car ownership and other assets. But this
\nverification is possible only when tax officials have access to
\ntaxpayers' records.<\/p>\n
Tax officials' inability to cross-check taxpayers' income data
\nwith their records of expenditure and current (financial) and
\nfixed assets is indeed one of the main reasons behind the
\npervasive tax evasion or tax underpayment.<\/p>\n
However, instead of only blaming conflicting rulings in
\nseveral laws and regulations and the uncooperative attitude on
\nthe part of other government agencies, officials in the taxation
\ndirectorate general should ask themselves why the government has
\nnot yet vested tax officials with so broad an authority to open
\nrecords on various financial transactions.<\/p>\n
The reason is an extreme lack of trust. International and
\nnational opinion polls have always placed the taxation
\ndirectorate general, along with the customs directorate general,
\namong the most corrupt public institution in the country.<\/p>\n
As long as the taxation directorate general has not improved
\nits integrity through a more efficient, transparent
\nadministration tax system, there will always be strong political
\nopposition to providing tax officials with wider access to
\ntaxpayers' records, fearing that such power would be abused.<\/p>\n
In fact, the business community has been complaining of what
\nthey consider is too much discretionary power in the hands of tax
\nofficials to interpret and enforce the tax laws.<\/p>\n
Certainly, these issues should be among the problems to be
\naddressed by the proposed amendments of the 2000 tax laws that
\nare slated to be enacted later this year. This should not,
\nhowever, mean the law amendments should provide tax officials
\nwith automatic, unlimited access to taxpayers' financial records
\nand transactions.<\/p>\n
Tax officers do need bigger authority to open taxpayers'
\nfinancial data, to detain tax evaders and to foreclose on the
\nassets of tax evaders but only in relation to investigation of
\ntax crimes and selective tax audits.<\/p>\n
But a broader and stronger authority should be accompanied by
\nhigher standards of accountability and should be supervised with
\nclear-cut rules that stipulate stringent requirements tax
\nofficials have to meet to be able to open taxpayers' records on
\nincome, spending and assets. This means that the authority to
\nopen data on taxpayers should be used only sparingly and only
\nwhen there were strong suspicions of tax evasion or other forms
\nof tax crimes.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/tax-uncollected-1447899208",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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