Tax evasion

From Suara Karya

As a witness in the Eddy Tansil trial in the Central Jakarta Court, Ms Amelia (Manager of Danamon Bank, Tamansari branch) revealed that defendant ET deposited his money, involving Rp 178 billion, in a Cayman Island bank through the services of Danamon Bank. This was done to evade income tax in Indonesia. Beside ET, there are many people who deposit their money in banks abroad such as Macao, Hong Kong, Lichstentein etc., as these countries are "tax havens" for depositors. Almost all well-known private banks in Indonesia give these services.

There is nothing wrong with this practice because since the beginning of the New Order era Indonesia has introduced a free foreign exchange policy. In other words, foreign currencies can be brought in or transferred out of Indonesia without permission from the Ministry of Finance and the Central Bank, and virtually without control.

The money deposited abroad will generally be channeled back to Indonesia as credits to banks in this country, and these banks will in turn extend the money to clients as loans. Basically this system does not harm the society, but the interest rate of the loan can be very high.

In this case, the government of Indonesia suffers great losses because it cannot collect taxes on interest of money deposited abroad. There is no obligation for the banks in Indonesia, according to Law No 7/1983 article 23, to collect income tax when paying the interest of money deposited abroad. Also, based on Basic Law on Banks 1992, the banks in Indonesia have a legal obligation to keep the client's finances confidential, unless there is permission from the Ministry of Finance. This law is a great advantage to wealthy people, corruptors,and manipulators who have the facilities to personally deposit their money abroad, or through banks in Indonesia.

They enjoy income-tax evasion in Indonesia, and only have to pay a very small amount of tax in the country where they deposit their money.

The Directorate of Tax is helpless in this matter. So injustice prevails because the common people have no chance to evade taxes, as they are deducted from their salaries. It may be noted that a vast amount of money is deposited in foreign countries.

SUHARSONO HADIKUSUMO

Jakarta