Special office set up to collect taxes from large business groups

Rendi A. Witular, The Jakarta Post, Jakarta

The government is changing its approach to making large businesses pay their taxes. While in previous years the largest taxpayers were hailed and given awards, starting next month a special tax office will be given the task of squeezing out tax revenue from their coffers.

The office, to be called the Large Taxpayers' Office (LTO), will be launched on July 1 with a mission to collect taxes from the country's top 200 businesses in terms of sales.

"The staff (of the office) will work extra hard, and that's why they will be given strong incentives (higher salaries)," said Petronius Saragih, coordinator of the LTO project.

He would not give figures, but dismissed rumors that the office's staffers would have a monthly salary of as high as Rp 20 million (about US$2,247).

He said that one LTO accounts officer would be responsible for collecting taxes from at least three companies.

Petronious said that the new policy was crucial to helping create a healthy state budget.

According to Petronius, the country's 200 largest businesses, based on 2000 data, would contribute around 23 percent of the 2002 tax revenue target of Rp 184.7 trillion.

The government has been determined to rely more on taxes in financing the state budget and help reduce the deficit. Minister of Finance Boediono said recently that the government was aiming at lowering the state budget deficit to 1 percent of gross domestic product from the projected 2.5 percent of GDP for this year by various methods, including boosting tax revenues.

The plan to launch the LTO is part of an agreement with the International Monetary Fund, which is sponsoring the country's economic reform program.

The government has promised the IMF that it will implement bold measures to minimize tax evasion, broaden the tax base and clean up the corruption-infested tax directorate general by setting up the LTO, strengthening the internal audit system, launching a national tax audit and reporting system, and vigorously going after tax arrears.

It has been long been common knowledge that large taxpayers have often evaded their real tax liabilities by conspiring with tax officials.

The LTO will have its own office in the Medan Merdeka Timur area in Central Jakarta, which is quite far from the offices of the Directorate General of Tax.

Petronious said, however, that the staff for the LTO would be recruited from the directorate. At the beginning there would be around 60 accounts officers.

He added that the LTO would report to the directorate, but it would be supervised by the Ministry of Finance.

He dismissed suggestions that without external supervision, there was a strong chance that corruption and collusive practices in the taxation field would only shift to the LTO.

He pointed out that there would be a checks and double checks mechanism that would minimize the chance for the accounts officers to become involved in corruption or collusion.

He added that the oversight to be exercised by the finance ministry would be sufficient and would work well.

Petronius said that in the future, the LTO might expand the scope of its work to cover the country's largest individual taxpayers.