Banks want tax system to respect banking secrecy

Banks want tax system to respect banking secrecy

Urip Hudiono, The Jakarta Post/Jakarta

The banking sector has voiced its opposition to provisions in the
proposed tax law amendments that would give the tax office the
power to directly require banks to disclose information on their
customers' accounts for investigative purposes, arguing that this
would hurt the industry's essential nature as a "business based
on trust".

"Such stipulations would, firstly, violate the principle of
banking secrecy enshrined in the Banking Law (No. 10/1998)," said
Association of State Banks (Himbara) chairman Sigit Pramono on
Wednesday during a meeting with the House of Representatives'
committee deliberating the proposed amendments to the tax
legislation.

Sigit, the president director of Bank Negara Indonesia (BNI),
suggested that these provisions be reviewed and brought into line
with the Banking Law.

"The banks might consider accepting the stipulations if the
tax office's request for disclosure was forwarded to and approved
by the central bank," he said.

Under the current Banking Law, banks must keep confidential
all information on a customer's account, particularly the name of
the account holder and the account balance. Such information may
only be disclosed based upon a directive from Bank Indonesia
(BI).

For investigative purposes, however, the Ministry of Finance
may submit a request to BI for a disclosure order.

In the bill amending the prevailing law on general taxation
arrangements and procedures, the tax office will be allowed to
directly require banks to disclose such information based on the
argument that the current procedures as too cumbersome.

Several bankers had previously voiced concerns over the
proposed arrangements, arguing that they would violate banking
secrecy. Analysts are also concerned about the possible misuse of
such information given the widespread doubts about the integrity
of tax officials.

Himbara also opposed provisions in the draft tax law
amendments requiring the accounts of corporate taxpayers to be
inspected by auditors appointed by the finance ministry, given
the possible effects on publicly listed banks.

"This would violate the Capital Markets Law, which requires
that the accounts of publicly listed companies be audited by
public accountants approved by the Capital Market Supervisory
Agency (Bapepam)," Sigit said, suggesting that this would also
need to be reviewed.

On the proposed amendments to the current Income Tax Law,
Sigit suggested that the procedures and rates of a number of
taxes -- such as on interest on time deposits, savings accounts
and banking transactions -- be defined more clearly.

"We would also suggest that taxes on transactions be applied
only once, preferably on a cumulative basis at the end of the
financial year, to make the process simpler," he said.

Himbara consists of five state banks, including three of the
country's largest lenders by assets: Bank Mandiri, BNI and Bank
Rakyat Indonesia (BRI).

Association of National Banks (Perbanas) chairman Agus
Martowardojo said that banks were also concerned with provisions
in the draft amendments that give the tax office the right to
freeze a taxpayer's account based only on "alleged indications"
of attempts to evade tax.

"The stipulation should only be applied based on sound
evidence of an attempt to evade tax, not just indications," said
Agus, the president of Bank Mandiri.

Perbanas also suggested the scrapping altogether of a proposed
provision requiring taxpayers to report their daily expenditure
as part of the self-assessment process as such a requirement
would only make the taxation system more complicated.

Perbanas has 77 member banks, comprising the members of
Himbara and private sector banks.