Tax chief fears misuse of planned amnesty facility

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.