Tax revenue rises after introduction of detention policy

The Jakarta Post, Jakarta

The government claimed on Wednesday that tax compliance had improved following the introduction of a new policy that allows the tax office to detain tax evaders without trial.

Director General of Taxation Hadi Purnomo said that tax revenues from the non-oil and gas sector had increased by an average of Rp 7.8 trillion (US$917 million) per month from the usual Rp 5 trillion per month since the government introduced the policy.

"There seems to be an increase in compliance among taxpayers since the implementation of the policy," said Hadi during a hearing with the House of Representatives' finance commission.

Hadi was called in because the commission feared that the policy could further nurture extortion and collusion as it could be abused by unscrupulous tax officials to intimidate taxpayers.

Hadi explained to the commission that the policy was applied on the basis of accountability and prudence, as it required the approval of 12 officials to send a tax evader to jail.

He said that the detention should be approved first by officials in the local tax office, who included the confiscator, the chief collector, and the head of the local tax office.

After receiving the green light, the case would then be brought to the regional tax office, where it would need to be approved by the head of the investigation and collection division and the head of the regional tax office.

The case then went to the Directorate General of Taxation. In the directorate general, approval needed to be given by the head of the collection division, the director of investigation and collection, the secretary of the director general, the special assessment team and the director general himself.

Upon the completion of all these procedures, the case was then forwarded to the Ministry of Finance. Here, the head of the law bureau and the secretary-general of the ministry also needed to give their approval before forwarding the case to the Minister of Finance.

Currently, two tax evaders have been jailed based on the procedures outlined by Hadi. The two are local businessman Jasman Lim and Briton Mark Michael Greenwood.

Jasman was jailed for alleged non-payment of corporate taxes amounting in total to Rp 11 billion, while Greenwood's tax arrears were Rp 45.8 billion.

Elsewhere, Djangkung Sudjawardi, an expert advisor to the director general of taxation, said that 18 out of 68 large tax evaders had agreed to cooperate and settle their tax problems.

He said that three tax evaders had just paid what they owed, three had pledged to give personal guarantees, and 12 others had partly paid their tax arrears.

The 18 tax evaders owed tax arrears amounting in total to Rp 834 billion, Djangkung said.