Business urged to shun tax collusion

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."