Govt revives idea for tax amnesty

Govt revives idea for tax amnesty

Rendi A. Witular, The Jakarta Post, Jakarta

While the pace of reform of the tax system to prevent corruption
is not yet in full swing, the government has revived a
controversial idea for providing a tax amnesty for certain tax
evaders.

There are fears that granting such an amnesty may violate the
public's sense of fairness and justice, while it would also be
difficult for the tax office to properly determine which
taxpayers are indeed eligible for such an amnesty.

"We are currently preparing a draft bill for a tax amnesty to
be forwarded soon to the House of Representatives for
deliberation. We hope to gain approval from lawmakers for the
plan," Vice President Jusuf Kalla told The Jakarta Post on
Wednesday.

Kalla did not disclose the objective of the amnesty, but
according to a source at the Ministry of Finance it is part of
efforts to expand the taxpayer base by encouraging taxpayers --
who may have evaded taxes for many years -- to pay their taxes in
future.

Many believe that the amnesty is also aimed at luring back
billions of dollars parked overseas by Indonesia's conglomerates
in the aftermath of 1997-1998 financial crisis, in order to avoid
tax payments.

The source said the amnesty would cover both individual and
corporate taxpayers, and they would be able to settle unpaid
taxes paying between 10 percent and 20 percent of the total.

For corporate taxpayers, the proposed amnesty would cover
unpaid taxes between 1995 to 2003. For individual taxpayers, the
government is still undecided.

"I think the current situation is not appropriate for granting
such an amnesty because of the country's corrupt and inefficient
tax administration. It will only benefit bad businessmen," said
the source.

The tax amnesty plan is one of the administration's top
priorities, initiated by Coordinating Minister for the Economy
Aburizal Bakrie, who is a former chairman of the Indonesian
Chamber of Commerce and Industry (Kadin).

Kadin, the country's most powerful business lobby group, has
been promoting the idea of a tax amnesty for the past two years
as part of its comprehensive tax reform proposal that it
submitted to the government.

The previous administration rejected the proposal over
concerns that recalcitrant taxpayers and corrupt officials would
abuse the facility, exacerbated by a lack of transparency and
weak law enforcement.

Another concern is that it may discourage honest taxpayers in
continuing to pay their taxes, in the hope that they too would be
granted such a facility sometime in the future.

Director General of Taxation Hadi Purnomo is known to be among
those who reject the plan, arguing that the current lack of
transparency in the tax system may lead to abuse of such a
facility.

The Tax Office is the nation's most important source of
revenue, with the government seeking to ensure fiscal
sustainability and reduce its dependency on foreign loans.