Tax office seeks independence from govt red tape

Rendi A. Witular, The Jakarta Post, Jakarta

Top officials at the Directorate General of Taxation are mulling a controversial plan of turning the tax office into an independent agency in a bid to become more focused on netting taxpayers and enforcing tax laws.

A source at the tax directorate told The Jakarta Post that the officials had recently been lobbying President Megawati Soekarnoputri to sever its ties with the Ministry of Finance (MoF).

The source said the plan was driven by the fact that the directorate could not fully focus on its job to collect taxes and to enforce tax laws, because it had to deal also with other jobs which should be carried out by other agencies, such as making policies and drafting tax laws.

"The directorate's tasks are currently confusing. We collect taxes, enforce the tax laws and at the same time have to make tax policies," said the source.

Another reason was that the directorate had difficulty in directly coordinating with other ministries and government agencies because of its inferior position as a unit under the Ministry of Finance.

"The directorate has to go through a lot of extra red tape at the Ministry of Finance before reaching those agencies," said the source.

According to the source, the directorate was currently discussing whether to adopt a similar system used by the U.S. Internal Revenue Service (IRS), which is considered an ideal tax administration agency.

The IRS, a branch of the U.S. Department of the Treasury, is tasked only with the collection of taxes and the enforcement of tax laws. The agency does not deal with policy making, as it is handled by other government entities including the Department of the Treasury.

But the IRS commissioner and chief counsel are selected by the president and confirmed by the senate, meaning that they are directly responsible to the president and not to officials at the Department of the Treasury.

The tax directorate's plan is timely because currently the government is in the process of reorganizing the structure of the Ministry of Finance. The draft blueprint of the reorganization drive has been submitted to State Secretary to be discussed with the related ministers, before being approved by the President in the form of a presidential decree.

The finance ministry's legal division head Maurin Sitorus said the blueprint contained no plan to form an independent tax directorate.

"There is no such plan from the ministry. I have heard of the rumors that the directorate is planning to separate itself, but I have no written evidence about it," said Maurin who is also the spokesman of the ministry.

Meanwhile, Director General of Taxation Hadi Purnomo claimed that he was unaware of the plan.

"I don't know about the plan. I am only doing my job which is administered by the tax laws... I don't know who proposed it," said Hadi after attending a seminar on tax reform on Thursday.

But according to a source at the Ministry of Finance, Boediono was enraged to find out that he was bypassed by the tax officials when the plan was handed to the President, and so sent a warning letter to Hadi.

Elsewhere, tax and customs analyst Muhammad Ikhsan said that ideally the tax directorate should be independent from the Ministry of Finance, but under close supervision of an independent agency.

"I agree with the separation plan, because currently the directorate's tasks are mixed up. Tax regulations should now be handled by the State Fiscal Agency instead of by the tax directorate," said Ikhsan.

Ikhsan said he had proposed such a plan to the government in 1999.