Tax arrears rise to Rp 26 trillion, official says

The Jakarta Post, Jakarta

The tax office said on Friday that unpaid taxes rose to Rp 26 trillion (US$3.09 billion) last month or equal to the size of the government subsidy for fuel and non-fuel products in the current state budget.

Djangkung Sudjawardi, a senior tax official, was quoted by detik.com as saying on Friday that the above figure included Rp 10 trillion carried over from last year.

He said that last year's tax arrears were actually Rp 17.1 trillion but some tax payers managed to settle their payment after the tax office threatened to impose a travel ban against them or send them to prison without trial.

He said that last month, a travel ban was slapped on around eight tax evaders, but two of them immediately settled their tax obligations.

The huge amount of tax arrears in the country has been a major headache for the tax office, which has been under pressure to collect as much tax as possible as it now plays a greater role in funding the state budget especially amid strong political pressure to stop foreign borrowing, which has been mainly corrupted in the past.

According to data from the tax office, tax arrears have been on the rise in the past three years, amounting to Rp 13.3 trillion, Rp 17.3 trillion and Rp 17.1 trillion in 2001, 2002 and 2003, respectively.

The government has launched various measures to resolve the problem including empowering the tax office to temporarily detain recalcitrant tax payers without trial.

In October last year, one local businessman and one expatriate were detained by the tax office over alleged tax evasion.

Government Regulation No. 137/2000, which came into effect early in 2001, permits the office to detain tax evaders. However, in the beginning it was reluctant to carry out its mandate given the lack of support from other ministries.

The tax office would only go as far as confiscating the assets of tax evaders or banning them from traveling overseas.

But the office, under pressure to collect higher tax revenue to help finance the state budget, is clamping down on tax evaders. It recently warned another 70 tax evaders that they could go to prison if they did not pay their taxes.

The shock therapy launched by the government, however, has been criticized by some businessmen who said that detention was unfair as corrupt tax officials had been largely unpunished.

They also said that sending people to jail without trial would only do further harm to the country's investment climate. Tax arrears rise to Rp 26 trillion, official says