Thu, 10 Mar 2005

While the pace of reform of the tax system to prevent corruption is not yet in full swing, the government has revived a controversial idea for providing a tax amnesty for certain tax evaders.

There are fears that granting such an amnesty may violate the public's sense of fairness and justice, while it would also be difficult for the tax office to properly determine which taxpayers are indeed eligible for such an amnesty.

"We are currently preparing a draft bill for a tax amnesty to be forwarded soon to the House of Representatives for deliberation. We hope to gain approval from lawmakers for the plan," Vice President Jusuf Kalla told The Jakarta Post on Wednesday.

Kalla did not disclose the objective of the amnesty, but according to a source at the Ministry of Finance it is part of efforts to expand the taxpayer base by encouraging taxpayers -- who may have evaded taxes for many years -- to pay their taxes in future.

Many believe that the amnesty is also aimed at luring back billions of dollars parked overseas by Indonesia's conglomerates in the aftermath of 1997-1998 financial crisis, in order to avoid tax payments.

The source said the amnesty would cover both individual and corporate taxpayers, and they would be able to settle unpaid taxes paying between 10 percent and 20 percent of the total.

For corporate taxpayers, the proposed amnesty would cover unpaid taxes between 1995 to 2003. For individual taxpayers, the government is still undecided.

"I think the current situation is not appropriate for granting such an amnesty because of the country's corrupt and inefficient tax administration. It will only benefit bad businessmen," said the source.

The tax amnesty plan is one of the administration's top priorities, initiated by Coordinating Minister for the Economy Aburizal Bakrie, who is a former chairman of the Indonesian Chamber of Commerce and Industry (Kadin).

Kadin, the country's most powerful business lobby group, has been promoting the idea of a tax amnesty for the past two years as part of its comprehensive tax reform proposal that it submitted to the government.

The previous administration rejected the proposal over concerns that recalcitrant taxpayers and corrupt officials would abuse the facility, exacerbated by a lack of transparency and weak law enforcement.

Another concern is that it may discourage honest taxpayers in continuing to pay their taxes, in the hope that they too would be granted such a facility sometime in the future.

Director General of Taxation Hadi Purnomo is known to be among those who reject the plan, arguing that the current lack of transparency in the tax system may lead to abuse of such a facility.

The Tax Office is the nation's most important source of revenue, with the government seeking to ensure fiscal sustainability and reduce its dependency on foreign loans.





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