Revised version of tax law feared to worsen corruption

Revised version of tax law feared to worsen corruption

Rendi A. Witular, The Jakarta Post, Jakarta

The revised versions of three tax law amendment bills drafted
by the Directorate General of Taxation are far from what many had
been expecting as they still left the door wide open for
corruption, according to a business leader and an economist.

Sofjan Wanandi, the chairman of the National Economic Recovery
Committee (KPEN) and the Indonesian Employers Association
(Apindo), described the bills as being nothing more than legal
tools to enable the tax directorate to continue fleecing
taxpayers.

"There are no significant or positive changes in the bills.
This is really draconian legislation, and positions tax officials
above the public. Moreover, the (new) bills still contain gray
areas that will allow tax officials to extort taxpayers," said
Sofjan on Thursday.

Sofjan cited as an example the bill on general taxation
arrangements and procedures, which he said failed to provide for
payment deadlines or penalties to be imposed on the tax
directorate if it failed to pay rebates to taxpayers.

The absence of such firm stipulations would make tax officials
reluctant to pay rebates, and encourage them to extort taxpayers
who were seeking rebates, Sofjan said.

The Directorate General of Taxation has just completed
drafting amendments to three tax laws: Law No. 16/2000 on general
taxation arrangements and procedures, Law No. 17/2000 on income
tax, and Law No. 18/2000 on value-added tax on goods and
services, and luxury sales tax. The revisions include the
restructuring of tax bands and measures designed to improve
taxpayer compliance.

One of the controversial provisions contained in the amendment
bills is the granting of powers to the tax authorities to arrest
and detain people suspected of committing tax crimes.

Sofjan said the granting of greater powers to the tax
authorities to detain taxpayers had the potential to encourage
further extortion and collusion as the new powers could be abused
by unscrupulous tax officials to fleece taxpayers.

Businessmen have also complained about the introduction of
tougher sanctions for non-compliant taxpayers, and the lack of
corresponding provisions stipulating punishments for corrupt or
negligent tax officials.

Business associations had earlier proposed a provision
allowing for the recovery of damages in the civil courts against
negligent tax officials.

However, according to Sofjan, the directorate had turned down
the suggestion saying that punishments for tax officials were
already amply provided for by government regulation.

Economist Revrisond Baswir from Gadjah Mada University also
expressed concern about possible abuses on the part of tax
officials.

He said that the revisions should have been focussed more on
improving tax administration rather than changes in the tax
bands.

"Fixing up tax administration is more urgent. It will be
useless having the best tax band structure in the world if
taxpayers keep colluding with tax officials to undervalue their
tax liabilities," said Revrisond.