Tough ruling to be issued soon for tax evaders

Tough ruling to be issued soon for tax evaders

The Jakarta Post, Jakarta

A joint decree from the Ministry of Finance and Ministry of
Justice and Human Rights that allows for the jailing of
recalcitrant taxpayers for a maximum one year without trial will
be signed next week, according to a senior tax official.

Director General of Taxation Hadi Poernomo said on Tuesday
that the decree would be effective as soon it was signed.

"We are still waiting for the Minister of Justice and Human
Rights (Yusril Ihza Mahendra) who is still on an overseas trip,"
he told reporters, adding that the two ministers had in principle
agreed to the contents of the decree.

The joint decree, which was supposed to be signed in April,
was expected to help boost tax compliance and increase tax
collection revenue.

According to the directorate's data, tax arrears during the
past 10 years amounted to around Rp 17 trillion (about US$2.4
billion).

Such huge tax debts partly explain the country's tax ratio of
only around 13 percent of gross domestic product (GDP), compared
to the ratio in neighboring countries of around 40 percent.

As the cash-strapped government is desperately looking for
domestic revenue sources to finance the state budget, boosting
tax revenue by revamping the tax administration area is seen as a
crucial step.

According to regulation No. 137/2000, which came into effect
early in 2001, the tax office is actually allowed to detain tax
evaders. However, this apparently was not effective due to the
lack of support from the Ministry of Justice and Human Rights,
which has the authority over penitentiaries.

So far measures taken by the tax office against uncooperative
taxpayers mainly focus on seizure of assets and travel bans.

Based on the joint decree, temporary detention is imposed on
non-cooperative taxpayers who have a tax obligation amounting to
more than Rp 100 million to either the central or local
governments.

Prior to imposing detention, the tax office will send a letter
to tax evaders asking them to pay their taxes within 21 working
days. If the letter is ignored, the tax office will issue a
"distress warrant" demanding the taxpayers settle their tax
obligation within 14 working days. If the taxpayers still refuses
to comply, without a reasonable explanation or any attempt to
appeal to the tax court, the tax directorate would start the
process of sending the unscrupulous taxpayer to jail.

But there is skepticism that even with the introduction of the
joint decree, tax evaders can still avoid their obligations by
bribing corrupt tax officials.