State suffers losses from unpaid import taxes

Rendi A. Witular, The Jakarta Post, Jakarta

Each year the state suffers an average loss of Rp 8 trillion (US$909 million) in revenue from customs duties and import taxes, an official at the Directorate General of Customs and Excise said.

This annual loss is twice the amount of the Rp 4 trillion budgeted for 2003 to help the poor survive this week's increase in fuel prices and electricity rates.

The head of arrears collection at the directorate, Nirwala Dwi Heriyanto, told The Jakarta Post on Friday that in 2001 and 2002 the total duty and tax arrears reached Rp 17 trillion.

In 2002, that figure has been roughly calculated at about Rp 8 trillion.

"We are dealing with a serious problem of lost state revenue here; this is a significant figure," said Nirwala, adding that the directorate had designed a set of measures to collect the arrears beginning in April.

The losses, however, have not affected the state budget because the largest contributor to customs and excise revenue is the cigarette excise.

Nirwala said the losses were caused by importers who underpaid their tax obligations during the clearance process.

Indonesia uses a self-assessment tax system.

Nirwala said the customs office was usually unable to catch the importers because they often used fake documents to establish their identities and addresses.

Many importers cheat on the self-assessment system by undervaluing their import duties and import taxes before clearing their goods.

The importers then pay the artificially low taxes and duties based on their self-assessment reports as a formality to clear their goods.

After claiming their goods the importers quickly vanish to avoid being charged later by customs officials for underpayment.

This situation is exacerbated by some customs officials who are believed to collude with the importers to claim their goods.

There also are indications that customs officials assigned to collect tax and duty arrears have taken bribes to end their efforts. The arrears should be paid by importers at least 60 days after they receive a notice of underpayment.

"The fact is that the arrears we are going to collect date back to 2000. We are still investigating why our collection officials failed to collect such a huge amount of arrears," said Nirwala.

Nirwala also said some crooked importers managed to obtain import licenses by colluding with officials at the Ministry of Trade and Industry.

Until December of last year, the ministry was the only institution authorized to issue licenses to importers. However, due to several irregularities the Ministry of Finance passed a new regulation obliging importers to obtain a second license from the Directorate General of Customs and Excise.

The Ministry of Finance oversees this directorate.

To combat crooked importers and to help collect the tax and duty arrears, the ministry will issue a new ministerial decree on arrears prevention and publicly announce the 100 largest corporate evaders of import taxes and duties.