Confidentiality

Confidentiality

Article 40, paragraph (1) of the Basic Law of Banking No
7/1992 stipulates that banks are prohibited to reveal information
concerning the financial position and other matters of their
clients, a common practice in banking world.

The officials of the Directorate General of Tax can only audit
the bank's books upon a written order from the Finance Minister,
according to Article 41 paragraph (1) and Article 42 paragraph
(1) of Law No. 7/1992.

Recently Director General of Tax Fuad Bawazier issued a
confidential circulation to his subordinates to the effect that
the Directorate General of Tax can audit the banks as tax payers.
The circulation was issued in March 1995. Banks are regarded as
ordinary tax payers.

In my opinion, the Director General's circulation violates and
is contradictory to Law No. 7, 1992 concerning banking
principles. The banks must have the guts to refuse the auditing
unless the tax officials have a written order from the Finance
Minister. It is obvious that bank clients must be protected or
the bank will lose the confidence of its patrons, which could
result in the clients deserting the bank.

However, if there is a strong indication that the bank has
manipulated its books, then the Director General of Tax should
get written permission from the Finance Minister to audit the
bank's performance. And before issuing the permit, it is
advisable that the Minister ask for approval from the Central
Bank.

Based on Law No. 7/1992, Articles 40, 41, and 42, banks are
described as lex specialis, (having privileges and be protected).

SUHARSONO HADIKUSUMO,

Jakarta