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.