Tax office to recover 30% of tax arrears

The Jakarta Post, Jakarta

The government hopes to collect some 30 percent of tax arrears this year following the introduction of a decree allowing tax evaders to be held for one year without trial.

"We project that some 30 percent of total arrears will be fully paid this year. The rest hopefully will be settled in installments (in the following years)," Director General of Taxation Hadi Purnomo said on Thursday.

Hadi said the amount of tax arrears as of May had reached about Rp 19.86 trillion (US$2.42 billion).

On Wednesday, the Ministry of Finance and the Ministry of Justice and Human Rights signed a joint decree allowing for the temporary detention of recalcitrant taxpayers.

The cash-strapped government is under pressure to increase tax revenue to finance the state budget, which is heavily burdened with the huge cost of the late-1990s bank bailout program. With foreign financing expected to decline, the government has to turn to domestic financing sources.

Experts have said that improving the tax administration system, including making wealthy people and companies pay their taxes, is one step the government must take.

Last year, the government introduced a special tax office to oversee large companies.