Tax evaders may be jailed for a year without trial

Rendi A. Witular, The Jakarta Post, Jakarta

Tax evaders could be sent to prison for a maximum of one year without trial under a new decree to be signed by the Ministry of Finance and Ministry of Justice and Human Rights, a senior governmental official said on Thursday.

Head of the tax collection division at the Directorate General of Taxation at the Ministry of Finance Djangkung Sudjawardi told The Jakarta Post on Thursday that the decree, which will come into effect "sometime in April", is aimed at forcing recalcitrant taxpayers to pay their taxes.

The move comes amid the government's growing concern over the rising amount of tax arrears.

Tax arrears payable over the past 10 years have reached Rp 17 trillion (US$1.9 billion), according to the directorate's data.

"The joint decree, which is in line with Government Regulation No. 137/2000 on tax evaders, will enable us to send delinquent taxpayers directly to prison," said Djangkung.

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

Thus far, the tax office only dares to confiscate the assets of tax evaders or ban them from traveling overseas, according to Djangkung.

The country's penitentiaries are under the auspices of the Ministry of Justice and Human Rights. Thus, with the ministry wiling to cooperate, the tax directorate can now use the prison to detain tax evaders, he said.

Based on the joint decree, temporary detention is imposed on non-cooperative taxpayers who have a tax obligation amounting to over Rp 100 million to either the central or local governments.

Prior to imposing detention, the tax office will send a letter to tax evaders asking them to pay their taxes within 21 working days. If the letter is ignored, the tax office will issue a "distress warrant" for the taxpayers to settle their tax obligation within 14 working days.

If the taxpayers still refuse to comply, without a reasonable explanation or any attempt to appeal to the tax court, the tax directorate would ask the Ministry of Finance for a detention approval.

An approval from the ministry will be issued within seven working days.

Once the approval is granted, tax officials, accompanied by local police or officials from the Attorney General's Office, could arrest the unscrupulous taxpayer.

Approval from the Ministry of Finance is needed if the taxpayer defaults on taxes imposed by the central government such as income tax, land and property tax and value-added tax.

While, as far as taxes imposed by local government are concerned, such as vehicle tax, restaurant tax and entertainment tax, tax officials will only need approval from the governor.

Djangkung said that starting in April, the tax directorate will issue distress warrants and travel bans to 60 non-compliant taxpayers who owe the state Rp 1.5 trillion in tax arrears.

Fifteen of these taxpayers are expatriates, mostly from the U.S., who risk detention if they continue to be uncooperative, Djangkung warned.

Of the total Rp 17 trillion in tax arrears the tax directorate is now seeking to regain, around Rp 5.5 trillion is owed by foreign companies and individuals.

The directorate could only recoup some Rp 250 billion worth of tax arrears through the sale of confiscated assets in 2002.