Govt to set up new offices to bypass corrupt officers

Rendi A. Witular, The Jakarta Post, Jakarta

In a bid to curb corruption, the government plans to set up special offices for the collection of taxes from all government- owned enterprises, foreign investors and publicly listed firms.

The special office will be similar to the successful Large Taxpayers' Office (LTO), established last year to collect taxes from large companies.

The directorate general of taxation at the Ministry of Finance said that the new offices were aimed at minimizing tax evasion, broadening tax collection, curbing corruption at the directorate, and as such raising the government's tax revenue.

"This is part of our attempt to create good corporate governance in managing and collecting taxes," said I Made Gde Erata, the head of the tax administration reform team at the directorate.

Erata explained that the directorate had chosen the regional tax office VII and the tax offices for state-owned and province- owned enterprises, both located in Jakarta, to be modified so they were similar to the LTO.

The regional tax office VII is currently tasked to collect taxes from publicly listed companies and foreign investors.

Erata said that currently the directorate was in the process of recruiting new staff and providing infrastructure for the two offices to be capable of implementing the system currently being applied by the LTO.

The two offices are expected to be in full operation by early next year, he said, while adding that they would contribute around 25 percent of the government's tax earnings next year.

Launched in mid-2002, the LTO has been praised as a model of an accountable tax office. The office is tasked to collect taxes from the country's top 200 businesses which contribute 20 percent to the country's total tax earnings.

Minister of Finance Boediono said during the launching of the LTO that by centralizing the collection of taxes from large taxpayers at the LTO, it would be easier for the government or any agency assigned to supervise the office to detect irregularities in tax collection.

To date, the LTO is still directly supervised by a special auditor from the Ministry of Finance.

Another item that makes the LTO different from other tax offices is that the LTO assigns a special account officer to collect taxes and give consultation to one or two companies.

The LTO has also implemented an electronic self-assessment and payment system for large companies in order to prevent collusion between tax officials and the companies' management.

It is common knowledge here that businesspeople have often conspired with corrupt tax officials to pay less in official taxes.

Erata said that he was emboldened by the seeming success of the LTO, and the directorate was planning to add another 100 companies to become the office's clients soon.

He also said that the LTO system would be implemented by the directorate at its offices tasked to collect taxes from small and medium enterprises. The program will be launched for trial run in early 2004.

Analysts say all the tax reforms being conducted by the directorate is part of the government's strategy to graduate from the International Monetary Fund economic and financial supervision in 2004. After the graduation, the government needs to boost tax earnings to finance its own budget without foreign assistance.

This year the tax revenue target is set at Rp 235.9 trillion (US$29.8 billion).