Tax office blames conflicting regulations for revenue loss
The Jakarta Post, Jakarta
The tax office has blamed conflicting provisions in a number of regulations that restrict access to information on taxpayers for causing a loss of state revenue from taxes.
Such loopholes caused the state to have suffered a huge "potential loss" of up to Rp 676.5 trillion (US$74.34 billion) annually over the past few years due to undetected tax sources, Director General of Taxation Hadi Purnomo said on Tuesday.
"There are several regulations that are in conflict with each other, which restrict our access to many financial transactions that have enormous potential tax revenue," he said during a seminar on taxation, adding that these regulations must be immediately revised.
Hadi said that some of the tax sources were bank deposits, foreign exchange transactions, bad loans and credit cards.
He explained that the state could actually raise Rp 252 trillion in tax revenue annually from bank deposits; Rp 243 trillion from foreign exchange transactions; Rp 180 trillion from bad loans; and Rp 1.5 trillion from credit cards.
Hadi did not explain how his figures had been arrived at.
Examples of contradictory regulations were Law No. 24/1999 on foreign exchange transactions and currency rates and a similar central bank regulation, said Hadi.
Article 3 of the law stipulates that the central bank shall have access to information and data on forex transactions engaged in by citizens.
However, a central bank regulation says that such information is confidential to other parties, including the tax office.
Another provision that restricts access is article 26 of Law No. 15/2002 on money laundering, which obliges the Financial Transaction Monitoring and Report Center (PPATK) to report its findings only to the police and the Attorney General's Office.
Hadi said that his office had been discussing the issues with relevant institutions in order to straighten out the inconsistencies.
"We signed a Memorandum of Understanding with the PPATK in December last year so that they will also report their findings to us. We're also planning to meet with Bapepam to see if they could also report on stock market transactions to us," he said, referring to the Capital Market Supervisory Agency.
He also hoped to see the gradual introduction of a single identification number (SIN) for each citizen to ease fiscal monitoring and coordination between related institutions.
Acknowledging reality, Hadi also admitted that massive tax revenues were also being lost through corruption in the tax service.
"This is a fact, but we've been trying to improve the honesty of our officials. We've also imposed sanctions on officials proven guilty of corruption. We do try, you know," he said.
The government is expecting tax revenue of Rp 239 trillion this year, excluding excise and import duties. It has set a tax collection target of Rp 256.9 trillion in the 2005 state budget.