Tax chief fears misuse of planned amnesty facility

Rendi A. Witular, The Jakarta Post, Jakarta

The tax office will oppose plans to provide a tax amnesty unless the government provides the office with unlimited access to taxpayer information to ensure the amnesty is not abused, the tax chief said.

Director General of Taxation Hadi Purnomo said a lack of transparency in granting the facility would cause a moral hazard and could violate people's sense of fair play, since it would be difficult for the office to distinguish between good and bad taxpayers.

"A tax amnesty can be provided but there should be a clear mechanism to ensure transparency in the process. We want greater access to taxpayers so we can determine who is eligible or not (for the facility)," said Hadi after a hearing on Monday with House of Representatives Commission XI for financial affairs.

The government is considering providing a tax amnesty as part of efforts to lure back billions of dollars parked overseas by the country's conglomerates, and to encourage them to pay the real amount of their tax obligations in the future.

Taxes have increasingly become the most important source of revenue for the government as it seeks to ensure fiscal sustainability and reduce its dependency on foreign loans.

Coordinating Minister for the Economy Aburizal Bakrie, former chairman of the Indonesian Chamber of Trade and Industry (Kadin), has floated the idea of drafting a law on a tax amnesty.

The previous finance minister, Boediono, rejected a similar proposal over concerns that recalcitrant taxpayers and corrupt officials would abuse the facility.

Hadi said people should learn from the 1984 debacle when the government provided a similar facility to taxpayers and a number of conglomerates took advantage of the measure to evade their taxes.

"We should learn from the 1984 tax amnesty policy. Due to a lack of transparency, moral hazards occurred," said Hadi.

He said the introduction of a tax amnesty could also discourage honest taxpayers from paying taxes in the future in anticipation of a similar facility for themselves.

"We are still studying the facility to ensure fairness. It will be a long time before the government imposes it because the facility will be in the form of law, which requires the endorsement of the House," Hadi said.

The tax office has on a number of occasions urged the Minister of Finance and the central bank to grant it the authority to access information on activities in the capital market and banks, in a bid to ensure tax compliance.

However, the central bank has rejected these requests, saying it would violate banking secrecy and cause a massive outflow of deposits to more secure overseas banks.

Indonesia has adopted a self-assessment tax system in which taxpayers are given the authority to state their own tax filings, with the tax office later cross-checking the validity of the filings.