Taxpayers and penalties

In recent years, a complaint has been addressed to tax authorities by corporate taxpayers through their representative the Indonesian Chamber of Commerce and Industry (KADIN) regarding the excessive powers of tax officials in assessing taxes.

According to Article 38 of Law 16/2000, when taxpayers fail to file their tax returns by negligence, such an offense shall be punished by imprisonment for a maximum of one year, while non- filers will also be fined equal to 200% of their unpaid tax.

Although the sanction is clear, in reality Article 38 is seldom put into practice. There is a very good chance, however, that some unscrupulous tax officials might be using this article as a tool to propose "deals" with "bad" taxpayers. They might be helping taxpayers provide their income tax returns and submit the returns late with an expectation that the offense penalty will never be applied.

This kind of corruption could be prevented, if not totally eliminated, by making the severe punishment of article 38 more lenient like in systems in New Zealand and Britian.

Applying the same philosophy of self-assessment, when faced with non-filers, tax authorities in these countries issue a tax determination using official estimates of tax dues and send them out to taxpayers as a reminder. If taxpayers do not respond to this "reminder", the tax amount due will stand and cannot be contested in the tax court.

The tax amnesty review team wants to create a good environment to encourage compliance with the new system. Encouraging people to start with a clean slate is the main purpose of the proposal. However, to do that, the tax system must be reengineered and revitalized. And so must law enforcement.

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