Business urged to shun tax collusion

Rendi A. Witular, The Jakarta Post, Jakarta

With collusion and corruption between businesses and tax officers showing little signs of abating, President Susilo Bambang Yudhoyono has urged an end to the practice to prevent a high-cost economy.

Speaking on Thursday as the keynote speaker of a two-day meeting of the nation's powerful business lobby group -- the Indonesian Chamber of Commerce and Industry (Kadin), Susilo warned the businesspeople of severe consequences if they were caught in a tax fraud case.

"There will be no leniency for those who evade their proper tax payments, or act in collusion with tax officers to reduce the payment," avowed Susilo, reminding them that the government was now beginning to focus on efforts to uphold the law and maximize state revenues.

To help increase state revenue from taxes, Susilo said that government regulations on taxation would soon be issued, notably the ones related to efforts to increase the tax base and to reduce corruption.

"Our policy is clear; we will increase the tax base and compliance," Susilo said.

Over the years, the government has been relying heavily on revenue from taxes to finance the state budget, contributing more than 70 percent of the total state revenues.

For this year, tax revenues are estimated to reach Rp 297.5 trillion (US$32.4 billion), up from Rp 239 trillion last year.

However, tax collection in proportion to population is extremely low and has the potential to increase by as much as 10- fold. Mass leakages in state revenue resulting from the collusion between taxpayers, especially businesspeople, and the tax office, is partly to blame for that.

One of the more common methods used by the tax officers is for them to offer their "services" with taxpayers to manipulate the amount of taxes to be paid to the state, in return for a certain under-the-table fee, which is often far less than the taxpayer actual payment to the state should have been.

Another practice is that the officials will find a minor clerical error or typo in the tax return documents and "force" taxpayers to pay an under-the-table "fix-it fee" by threatening the taxpayer with severe fines or prison.

Kadin chairman Mohamad S. Hidayat, while acknowledging that such collusion was commonplace, stated that it was the result of a weak bureaucracy with various loopholes in the tax regulations.

"The business community has not yet seen any improvement in the bureaucracy during the government's first three months. Even the new ministers have expressed their concerns to us on how the current bureaucracy is decaying and hard to fix," he said.

The poor performance of government officials often "forces" businesspeople to seek a "quick solution" by handing over some cash to state officials just to get routine things processed.

Hidayat urged the government to focus on improving transparency and certainty of tax regulations, boosting tax compliance and reforming the bureaucracy.

"We are committed to, along with the government, tackling this problem. We have now pledged that it is time for the business community to comply with the taxation regulations and laws, not to avoid them."