Stiff sanctions needed to boost taxpayer base: VP

Stiff sanctions needed to boost taxpayer base: VP

Rendi A. Witular, The Jakarta Post/Jakarta

The introduction of punitive measures by the Directorate General
of Taxation to make potential taxpayers comply with their
obligations has received strong support from a cash-strapped
government desperately seeking ways to boost the country's tax
take.

"The tax laws should be hard on taxpayers to make them pay up.
Weak tax laws will only encourage people to evade tax," Vice
President Jusuf Kalla said after Friday prayers.

Kalla was responding to concerns from the business community
and taxpayers over proposed amendments of the tax legislation
that are being deliberated by the House of Representatives and
are likely to come into effect early next year.

The government has submitted to the House proposed amendments
to Law No. 16/2000 on general taxation arrangements and
procedures, Law No. 18/2000 on VAT and luxury tax and Law No.
17/2000 on income tax.

Jointly drafted by the tax directorate, the Indonesian Chamber
of Commerce and Industry (Kadin) and academics, the draft
amendments had originally been expected to be taxpayer and
business friendly.

But several changes were made by the tax directorate before
the drafts were submitted to and later signed by President Susilo
Bambang Yudhoyono. The changes included the insertion of criminal
provisions into the tax legislation.

"The drafts are still subject to change. The business
community should convey their concerns to the legislators. However,
at the same time, the business community and foreign nationals
should also be honest in paying their taxes," Kalla said.

Tax collection in Indonesia, Southeast Asia's largest economy,
remains one of the lowest among major Asian economies. As of the
end of last year, only 3.67 million individuals, corporations and
institutions were registered as taxpayers.

The tax directorate has targeted increasing the number of
taxpayers to 10 million by sending out tax file numbers, locally
known as NPWP, but some have fallen into the wrong hands.

Tax law revision committee chairman I Made Gde Erata said that
criminal provisions were needed since as the tax legislation came
within the realm of public law, in which there were no
arrangements for civil suits.

"Tax law is public law which deals with the relationship
between the state and its citizens. Therefore, criminal charges
are necessary to make people comply with their obligations to the
state," he said.

University of Indonesia tax analyst Munir Ali called on the
government to make the tax laws more taxpayer friendly,
highlighting the interests of foreign nationals who are often
discouraged from paying their taxes here due to various problems.

"Foreign nationals are discouraged from paying taxes here as
the country applies global income tax, which enables the tax
directorate to also tax income derived overseas," he said.

Munir said the worries of non-nationals did not concern the
amount of the tax they would have to pay but rather red tape
during the verification of their overseas income, which would be
time-consuming.

"More non-nationals will pay their taxes here if the tax
directorate excludes the taxing of their overseas income. This
would eventually encourage them to comply with the law," he said.