Tax office seeks independence from govt red tape

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.