Govt to set up new offices to bypass corrupt officers

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).