Int'l business lobbies slam tax office policy

Int'l business lobbies slam tax office policy

Rendi A. Witular and Apriadi Gunawan, The Jakarta Post,
Jakarta/Medan

International business lobby groups criticized on Wednesday
the latest move by the Directorate General of Taxation to send to
prison businessmen including foreign expatriates who fail to
settle tax arrears.

Chairman of the International Business Chambers Peter G.
Fanning expressed concern that the move would further undermine
the country's investment image.

"It will not do the image of Indonesia any good... Bad news
travels much faster than good news. If people avoid tax, there
are ways of bringing them to court without using the "17th
century" solution," said Fanning, referring to the detention
policy.

He added, however, that the move might have resulted from the
tax office's frustration with the country's weak legal system in
making sure people pay tax.

He explained that businessmen were aware that the tax office
had been under pressure to raise funds to finance the state
budget, but the latest move of sending people to prison without
prior trial would generate a bad atmosphere in which people would
tend to avoid contact with tax officials.

Fanning was commenting on the threat launched earlier by the
directorate general to send two foreign expatriates to prison for
being uncooperative in settling tax arrears totaling some Rp 67
billion (US$7.97 million). The directorate was waiting for
approval of the Ministry of Finance.

The directorate had previously sent one local businessmen by
the initial of JL to Cipinang Penitentiary for tax evasion. Such
a move is allowed under a recently introduced ruling.

Chairman of the Jakarta Japan Club Foundation Takafumi Sone
shared Fanning's concerns, saying that the detention of
foreigners without prior trial was "too much".

He added that Japanese businessmen would always comply with
existing tax regulations.

"We are not comfortable because we have already been facing
hard times here... If there is a problem, we usually file an
objection with the tax office and settle it at the tax court,"
said Sone.

Both businessmen said that a reform package was needed to
overhaul the country's tax office and legal system.

The directorate declined to reveal the identity of the two
foreigners. However, a source at the directorate said the two
were from the United Kingdom and Japan.

The tax office has accused them of failing to pay their
corporate and personnel income and value-added taxes.

The two foreigners had been barred from leaving the country.

The directorate has also warned another 16 expatriates that
they could face the same fate if they continue to refuse to pay
their taxes.

But Director General of Taxation Hadi Purnomo said on
Wednesday that the two expatriates had agreed to settle their tax
arrears and his office would postpone the detention threat.

"As of today, the two expatriates have started to repay part
of their taxes. We now have good reason to postpone their
detention," said Hadi during his visit to Medan, the provincial
capital of North Sumatra.

However, Hadi said the government would still bar the two
expatriates from leaving the country until they paid the
remainder of their tax obligations to the government of
Indonesia.