Tax office seeks arrest of U.S.-based power company KBC executives
The Jakarta Post, Jakarta
The tax office started pursuing three executives of the U.S.- based power firm Karaha Bodas Company (KBC) on Monday, saying the government had given it the OK to jail them on charges of tax evasion.
"As the Minister of Finance has signed the decree authorizing the arrest of these people, we will start the arrest process today," Director General of Taxes Hadi Purnomo said, adding that the decree was signed on Nov. 12 -- the last working day before the long Idul Fitri holiday.
Hadi acknowledged, however, that his office was in the dark about their whereabouts or whether they had left the country.
Under a 2001 regulation, the tax office is allowed to jail uncooperative taxpayers for up to a year without trial.
The tax office holds the three persons responsible for accounting fraud in fiscal year 1998-1999, which allegedly defrauded the state of Rp 12 billion (about US$1.3 million) in potential value-added tax (VAT) revenue.
The three, including two foreign citizens, are identified by the initials of RDMC (KBC director), MC (KBC finance manager), and LSP (KBC director appointed by the firm's local partner). KBC is owned by Caithness Energy of Florida and Power & Light Co., both U.S. firms, and local partner PT Sumirah Daya Sakti.
Aside from the tax office, the police are also seeking to arrest the three persons on fraud charges.
The police started the hunt the three several months ago after KBC won a court case with state oil and gas company Pertamina in the United States, as a result of which the state firm was ordered to pay KBC US$291 million in damages.
The government argues that the hunt for the three persons is part of the anticorruption drive, but most analysts see it as crude retaliation against KBC. They also consider the effort to be useless as the arrest of the three persons would do nothing to change the court's decision ordering Pertamina to pay damages to KBC.
KBC was one of dozens of independent power producers (IPPs) whose projects were put on ice by the government following the economic crisis in the late 1990s. KBC at the time had a contract with Pertamina to develop a geothermal power project in West Java.
A Swiss arbitration court ruled in 2000 that Pertamina must pay damages to KBC for the termination of the project. In expensive yet ultimately fruitless litigation, Pertamina challenged the arbitration ruling in the U.S., Canadian, Hong Kong and Singaporean courts.
Early this year, a U.S. court rejected Pertamina's appeal against the arbitration award.