Wed, 24 Aug 1994

Bawazier to crack down on tax evaders

JAKARTA (JP): In an effort to crack down on groups abusing their tax-free status, Director General of Taxation Fuad Bawazier said yesterday that his office will begin taking a closer look at social foundations.

He announced after an inauguration ceremony of the State School of Accountancy (STAN) in Tangerang, West Java, that several individuals have profited by hiding behind foundations to evade taxes.

He explained that some foundations, especially those dealing with education and health, are apparently operating as "for- profit" organizations.

However, he admitted that the majority of foundations in the country are still pure social foundations which need exemptions to keep on operating.

"Of course, they don't need to be afraid of being the target of tax scrutiny," he said.

When asked how to determine whether a foundation is for- profit, he responded that his office will evaluate them based on "material principles," that is, income, instead of their formal classification.

Bawazier formerly said that his office has already taxed certain foundations, including those running first-class hospitals on Jl. Rasuna Said and Pondok Indah, both in South Jakarta.

He said these hospitals pay 100 percent of their property taxes, as compared to the 50 percent paid by most other hospitals.

Bawazier also said yesterday that the country's tax reform is scheduled to become effective Jan. 1, 1995. He said that the bills on the reform have been delivered to the House of Representatives.

The bills include changes in the value added tax (VAT), sales tax, income tax and land and building tax (property tax).

Minister of Finance Mar'ie Muhammad formerly said that the tax reform would expand allowable withholding and offer more transparency and fairness.

According to the minister, the current 10-year old tax law is no longer relevant due to the present state of economy.

He said some Rp 40.07 trillion (US$18.5 billion) of the Rp 59.74 trillion in internal government revenue envisaged for the current 1994-95 fiscal year is expected from direct and indirect tax receipts outside the oil sector.

The 1994-95 state budget is based on Rp 18.84 trillion coming from income tax, Rp 13.23 trillion from VAT, Rp 2.62 trillion from excise duties and Rp 1.62 trillion from property tax. (05)