Bawazier to crack down on tax evaders

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)