Controversial article in tax law dropped

The Jakarta Post, Jakarta

The government has finally revoked a controversial article in a draft revision to the country's tax legislation, which gives the tax office greater powers to detain violators, following protests from government agencies and business leaders.

Robert Pakhpahan, a member of the tax reform team at the Directorate General of Taxation, told The Jakarta Post on Tuesday that the directorate had decided to drop the article for fear that it would hurt business confidence.

The Directorate General of Taxation, which falls under the auspices of the Ministry of Finance, has drafted amendments to three tax laws: Law No. 16/2000 on general taxation arrangements and procedures, Law No. 17/2000 on income tax and Law No. 18/2000 on value-added tax on goods and services and luxury sales tax.

The directorate has included several articles in the amendment to Law No. 16/2000 that will confer greater authority on the tax office to detain major tax evaders without trial and impose stronger sanctions on a range of lesser violations.

Under the draft law, a tax official assigned to investigate a tax crime will have special powers -- similar to those of the police -- to arrest and detain people suspected of committing tax crimes.

Moreover, the directorate will also have direct, full authority to investigate a tax crime without consulting the police -- the way the current system works, but which has been deemed ineffective.

However, business leaders and economists have criticized the drafts, saying they contain many loopholes that would allow for corruption and misuse of power.