Government starts crackdown on tax evaders

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)