Thu, 26 Jun 2003

Govt gets tough against tax evaders

Muninggar Sri Saraswati and Dadan Wijaksana, The Jakarta Post, Jakarta

The Ministry of Finance and the Ministry of Justice and Human Rights have signed a joint decree allowing tax evaders to be temporarily detained without trial, a move expected to boost compliance with tax laws.

The decree, signed on Wednesday by Minister of Finance Boediono and Minister of Justice and Human Rights Yusril Ihza Mahendra, will allow recalcitrant taxpayers to be "taken prisoner" by a penitentiary for a maximum of one year.

Boediono said the new policy was aimed at "securing the government's rights (in collecting tax). And we will use it fairly and honestly to secure the country's taxation system."

The policy was meant as a shock tactic against tax evaders as well as a means to boost the collection of tax revenue, which is badly needed by the cash-strapped government to finance the state budget.

"However, if the (recalcitrant) taxpayers reject our calculations of their taxes, they might take it to the taxation court or report it to the taxation ombudsman," Boediono told a press conference.

The ruling would provide more ammunition to the existing Regulation No. 137/2000, which was enacted in early 2001, that empowers the tax office to detain tax evaders. But the regulation was not effective, in part due to a lack of support from the Ministry of Justice and Human Rights, which oversees penitentiaries.

So far, measures taken by the tax office against uncooperative taxpayers have mainly focused on freezing their accounts, seizing their assets and banning travel.

Under the joint decree, errant taxpayers who fail to fulfill tax obligations of more than Rp 100 million (US$12,000) may be placed under temporary detention.

According to data from the tax office, tax arrears have been on the rise in the past three years, amounting to Rp 13.3 trillion, Rp 17.3 trillion and Rp 17.1 trillion in 2001, 2002 and 2003, respectively.

Director General for Taxation Hadi Purnomo said that the tax office would issue several warnings before sending tax evaders to prison.

"If they haven't paid after 37 working days, we'll send a warning; 21 days after that, we will send a reprimand. If they still show no good will, we'll issue a travel ban.

"We will send the tax evaders to prison if they show no intention to settle their obligation 21 days after the ban has been issued," he explained.

Hadi said that tax evaders could be imprisoned for six months, a sentence which could be extended for another six-month period. The tax office will issue an order to seize and auction the evaders' assets during the period of incarceration.

He added that between the end of 2002 and the second week of June, the office had issued 39 travel bans, including against eight expatriates. These 39 tax evaders would likely be targeted first under the new ruling.

Yusril said the tax evaders who had been imprisoned under the new ruling would receive different treatment at the penitentiary from ordinary prisoners or convicted criminals.