Government starts crackdown on tax evaders

JAKARTA (JP): The government set into motion on Wednesday their promise of cracking down on tax crime by announcing two wealthy individuals who allegedly evaded taxes, causing a loss of about Rp 1 trillion (US$107 million) to the state.

Coordinating Minister for the Economy Rizal Ramli said the two alleged tax evaders, with the initials "ST" and "DD," were among some 100 institutions and 50 individuals who are being investigated by the tax office for not reporting their taxes correctly under the country's self-assessment tax system.

"The government from now on will take strong action against tax crime," Rizal told a news conference. "We want the rich to pay their taxes."

He declined to disclose the full names of the suspects as it would be in violation of the tax law, but he said their names would be made known to the public once their trial starts.

He said convicted tax evaders risk a maximum sentence of six years in prison and a penalty of four times the amount of the unpaid taxes.

Director General of Tax Mahfud Sidik said the two alleged tax evaders had purchased shares and made investments both overseas and domestically worth billions of rupiah, and they also held a position as commissioner in several local and overseas companies.

"(But) their ability to purchase shares and make huge investment was not proportional to the income they reported in their tax returns, so it can be presumed that (they) did not report their (true) income," Mahfud said.

Rizal said the current administration would be serious in the enforcement of the country's tax laws.

He said that during the past 20 years, the enforcement of tax evasion had not been effective.

He said tax revenue was crucial for the economy because the government was determined to lower the budget deficit and foreign loans.

Rizal also said full enforcement of the tax law could be useful in prosecuting bad businessmen who have so far been able to escape the law.

He pointed out that Al Capone, a notorious American criminal in the 1950s, could only be sent to jail because of a tax violation.

Rizal has been facing challenges in forcing the top conglomerates to repay their huge debts to the government.

Rizal said the losses to the state due to suspected tax crimes committed by the 100 institutions and 50 individuals could reach more than Rp 4.3 trillion.

The state budget over the next few years will continue to be heavily burdened with the cost of the government bank restructuring and recapitalization program.

The government intends to increase the current tax ratio (tax receipts against gross domestic product) of 11.1 percent to 12.3 percent next year and 16.1 percent in 2004.

Tax officials have said without serious law enforcement, the targets would not be achieved.

Out of the country's population (more than 200 million), only 1.3 million people have tax identification numbers (NPWP) and only 600,000 legal entities have been registered as regular taxpayers.

The possible tax revenue loss over the past 10 years from inadequate collection efforts and low tax compliance reached Rp 130 trillion, the government has estimated.

Under the country's tax ruling, an annual income of up to Rp 25 million is subject to 5 percent tax, between Rp 25 million and Rp 50 million is subject to 10 percent tax, between Rp 50 million and Rp 100 million 15 percent tax, between Rp 100 million and Rp 200 million 25 percent tax and above Rp 200 million is subject to 35 percent tax.

The government earlier formed a joint team, including officials from the tax office, the Attorney General's Office, the intelligence agency and the police, to help resolve the tax crime problem.

Separately, Attorney General Marzuki Darusman said on Wednesday that the list of people suspected of evading taxes came from various professions and economic classes and were mostly state officials, businessmen, lawyers and artists.

"During the investigation, we found that their annual tax reports were way below the level of their living standards and their way of life which can bee seen by the public," Marzuki said. (rei/bby)