Bankers oppose tax office's controversial plan

Dadan Wijaksana, Jakarta

The central bank and top bankers have raised objections to a proposal from the tax office that seeks access to information on bank accounts, saying it runs counter to the code on banking secrecy stipulated under the banking law.

Bank Indonesia Governor Burhanuddin Abdullah said that Banking Law No. 10/1998 should first be amended if the request were to be implemented.

"At present, the procedures say that the banking secrecy code may be set aside only under special circumstances -- at the request of the minister of finance, the police and the Attorney General's Office (AGO).

"Thus, the minister of finance may ask for information on a depositor's account from the BI governor. This system has been in operation for some time, and we'll stick with it for now," Burhanuddin said on Wednesday.

The ministry of finance oversees the tax office.

The Directorate General of Taxation has recently asked the central bank to be allowed to obtain information about the source of funds kept by depositors in banks as part of its bid to boost the number of taxpayers, and eventually increase tax revenue.

The office argued that the number of people eligible to pay tax -- just over 2 million at present -- would rise significantly under this move.

The tax office has been under pressure to collect more tax revenue -- now the largest contributor, at more than 70 percent, to the state budget. Ironically, however, around half of the tax revenue is used to service the government's huge public debt.

But the plan has thus far raised objections from various quarters, notably the banking sector, which has claimed that such a practice could hurt the banking industry as a whole.

President of Bank Negara Indonesia (BNI) Sigit Pramono has been the latest to voice objections, saying that the move could erode hard-won public confidence in the banking sector and, ultimately, prompt massive runs.

"We object to the plan. It has the potential to discourage people from depositing their funds in local banks," Sigit told The Jakarta Post.

"It could also derail efforts by the banking sector to regain public trust. I'm sure there must be other ways to boost tax collection other than through this measure."

Meanwhile, Sjarifuddin Alsha, director for the value-added tax unit at the Directorate General of Taxation, who is also a member of the so-termed tax reform team, told the Post on Thursday that the plan was also aimed at improving the credibility of the banking sector.

"If it is adopted, it will ensure that the money stashed in our banks is legitimate and originates from a lawful source -- which could in turn lift the image of the banking sector.

"Customers have nothing to fear if they earned their money from lawful business activities. Those who are afraid are likely to have something to hide," Sjarifuddin said, adding it would also boost bank compliance in the antimoney-laundering drive.

"We have only 2 million taxpayers in a population of more than 200 million: There must be plenty of people eligible to pay tax who are evading their obligations."

He added that discussions were under way to look deeper into the issue, involving officials from the tax office and ministry of finance, the central bank and also the banking industry.