51 companies face trial for alleged tax fraud

JAKARTA (JP): The government will take 51 trading companies to court for allegedly manipulating the 10 percent value added tax.

Tax Director General Fuad Bawazier alleged here yesterday that the 51 companies, based in Jakarta, Tangerang and Bekasi, manipulated value added tax invoices to get larger refunds from the government.

Fuad refused to disclose the estimated tax revenue losses of what he called one of the biggest tax frauds uncovered by his office.

"The financial losses resulting from the tax manipulation is great enough," he said after submitting dossiers on the 51 companies to Deputy Attorney General for Special Crime Yunan Sawidji.

The trading companies, with gross sales of at least Rp 240 million (US$109,000), are required to register for a taxable firm status at the Tax Director General's Office. Smaller companies, of their own will, can also elect the same status, which allows them to collect the 10 percent value added tax from their customers.

The value added taxes collected by the companies, under the existing mechanism, can be credited against the similar taxes already paid to their wholesalers.

If the amount of the taxes they pay is higher than what is collected they are allowed to have the difference refunded.

"However, in the process, many taxable companies have manipulated the tax invoices to inflate the balance between what they have paid and the amount they have collected," Fuad explained.

He said that some of the 51 companies were guilty of using false names and false addresses to fool tax officials.

The Deputy Attorney General Yunan said that his office, in cooperation with tax officials, would soon establish a team to investigate the Tax Directorate General's findings.

If the 51 companies are found guilty of violating the Anti- Corruption Law No. 3/1071, Yunan said they could face the maximum sentence of life in prison.

Penalty

As an initial penalty, Fuad's office has revoked the privileges of the 51 companies as taxable companies, thereby suspending their rights to collect the value added tax from their customers.

"The penalty is important to protect the public," he added.

Fuad did not rule out the possible involvement of tax officials, saying that it is up to the Attorney General's Office to probe any possibilities of collusion between tax officials and businessmen.

According tax office sources, the government has thus far discovered 3,000 instances of valued added tax manipulation, causing financial losses to the state of around Rp 150 billion per year.

Between January and May 1993 alone, the government uncovered 39 cases of value added tax cases, causing a loss of approximately Rp 30 billion to the state.

Investigation

As many as 27 of the cases have been submitted to the Attorney General's Office while the remaining 12 have been submitted to the police for further investigation.

A number of tax fraud cases have been taken to court but many offenders were acquitted for a lack of evidence.

One of the most controversial cases of tax manipulation took place in Surabaya, East Java, early last year when the local court cleared two businessmen of tax manipulation charges. The frauds were estimated to have caused approximately Rp 5.1 billion in lost tax revenues.

Disappointment with the acquittal of the two businessmen was voiced not only by tax officials but by President Soeharto himself.(imn/hen)