Tue, 31 Aug 2004

Govt continues modernizing tax system

Tony Hotland, The Jakarta Post/Jakarta

The government is now moving fast to implement its new tax administration system in tax offices across the country, and expecting an annual increase of Rp 30 trillion (about US$3.21 billion) in tax revenue.

Speaking during a ceremony to kick off the implementation of what is promised to be a modern, transparent electronic system for six big money -- mostly for foreigners -- tax offices on Monday, Minister of Finance Boediono said that the system would eventually lead to better compliance from taxpayers.

"Taxpayers say they sometimes falsify their taxes because they don't trust us. This modern system makes everything more transparent. If they trust us, hopefully they will comply with their obligation, so that more taxes will be collected to support the state budget," said Boediono.

The six offices here comprise two that are specifically for foreign companies and expatriates, two for foreign investors, one for state-owned enterprises and one for domestic middle income taxpayers.

"We hope that foreign investors will not be reluctant to invest here now, because this system offers them accountability and legal certainty," Boediono asserted.

The system works on a sophisticated, completely electronic- based system (such as e-registration, e-filing, e-payment and e- counseling).

The offices will be manned by well-trained tax officials, each of whom will focus on certain taxpayers, and each of the taxpayers will have their documents taken care of by tax officials assigned to them. Each of the offices will also have a complaint center.

With the application of the system, the government said that taxpayers were guaranteed to get better and faster service as well as quicker solutions to disputes to assure legal certainty.

The system was initially applied in the Large Taxpayers Office (LTO), which was set up in mid 2002 after a recommendation by the International Monetary Fund and is tasked with collecting taxes from the country's largest income earners.

The establishment of the LTO and the plan to apply the system in all tax offices here are part of the government's efforts to reform the country's tax collection system and boost tax revenue.

The application of the system in these six offices and also in the LTO means that 55 percent of the country's total tax revenue would now be administered by a modern system.

The government expects that all tax offices on Java, which accounts for about 80 percent of the country's total tax revenue, would eventually be able to apply similar systems by 2007.

Director General of Taxation Hadi Purnomo said that the biggest constraint in launching the system in all tax offices was the availability necessary infrastructure.

Also as a part of the tax reform, the tax office established in June a special task force that is assigned to deal with serious cases and problems that involve foreign companies and expatriates. There are several cases that have been processed, involving companies from the Netherlands and Korea.