Quick processing of VAT refunds ordered

Quick processing of VAT refunds ordered

JAKARTA (JP): Minister of Finance Mar'ie Muhammad has
instructed the directorate general of taxation to speed up the
processing of value added tax (VAT) refunds for export-oriented
companies to help boost exports.

Mar'ie told a House Budget Commission hearing yesterday the
government was still in arrears for the disbursement of VAT
refunds to eligible companies.

"The refund backlog is quite big," Mar'ie said.

He refused to say how much the government owed exporters.

He said the slow processing of VAT refunds was because of the
tax office's extreme caution over possible abuse by exporters.

"It is true that there are unscrupulous exporters who falsify
tax invoices to get VAT refunds. However, don't generalize and
say all exporters as bad just because a few of them are
unscrupulous," Mar'ie said.

Exporters are exempt from duties and VAT on materials imported
for the production of export goods. Because they are required to
pay duties and VAT on materials upon their arrival -- if they are
not processed in a bonded zone -- they are entitled to a refund
on the duties and VAT which have been paid.

The tax office is responsible for the VAT refunds and the
Directorate General of Customs and Excise for the duties refunds.

Companies registered at the Export Service Facilitating Agency
get both VAT and duties refunds from the agency.

The minister instructed the directorate general of taxes to
take legal action against those trying to embezzle state funds
through VAT refund facilities by falsifying tax invoices.

"We better take legal actions against those unscrupulous
exporters, and against tax officials who collude with them rather
than slowing down the processing of VAT refunds for bonafide
exporters," Mar'ie said.

He said the directorate general of taxes had submitted dozens
of fictitious VAT refund cases, worth more than Rp 161 billion,
to the Attorney General's Office.

District courts have handed down verdicts on 51 tax evasion
cases worth Rp 150 billion. The verdicts were all in favor of the
tax office. But the defendants have appealed to higher courts.

Tax cases go to court whenever they involve crime, but those
not involving crime usually go to the tax arbitration body in
Jakarta.

Mar'ie said many exporters had complained about the slow
processing of VAT and import duty refunds.

Some textile exporters, for instance, said they got their
refunds as late as one year after submitting their claims.

Mar'ie said the slow processing of VAT refunds would affect
exporters' cash flows, especially small exporters.

Speedy VAT refunds would improve exporters' cash flows
enabling them to strengthen their working capital or even expand
their export production capacity.

Mar'ie told the commission that the government had disbursed
Rp 2 trillion (US$840 million) in VAT refunds during this fiscal
year's first nine months.

Of the total VAT refunds this fiscal year, the agency
disbursed only Rp 50 billion, agency chairman Tjoek Soeroso said.

Tjoek said his agency had also disbursed Rp 50 billion in
duties refunds for export-oriented industrial companies.

About 2,000 exporters are registered with the agency. Their
exports account for 35 percent of Indonesia's non-oil exports.

"We only disbursed Rp 100 billion (during the first nine
months of this fiscal year) because most of the companies
registered with the agency have got duty and or VAT exemptions
for their imported inputs from the directorate general of taxes,"
Tjoek said.

He said companies entitled to duty drawback must provide the
agency with guarantees for their duty and VAT exempt imported
goods. The guarantees can be bank guarantee or customs bonds or
promissory notes. (rid)