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.