Weak supervision nurtures corruption at tax office

Weak supervision nurtures corruption at tax office

Rendi A. Witular, The Jakarta Post, Jakarta

The weak supervisory system of the tax office is seen as one
of the main factors for corruption among tax officials, which
results in massive state losses and a poor business environment.

A senior official at the Ministry of Finance who requested
anonymity said the four institutions that supervise the tax
office were toothless because their authority to investigate
corruption was limited.

"In general, the four institutions have the same type of
tasks. But due to the lack of regulations, they don't have the
adequate authority to follow up complaints from taxpayers over
corruption by tax officials," the official said.

Questions over the effectiveness of the supervision of the tax
office arose after several businesspeople told The Jakarta Post
recently that they had been extorted by tax officials.

Businessmen B.Q. Vega and Widodo Latip have joined together in
suing the tax office in the Constitutional Court and the
administrative court, and are planning to report the extortion to
the police.

The Ministry of Finance's Inspectorate General, the National
Ombudsman Commission (NOC), the State Comptroller (BPKP) and the
Supreme Audit Agency (BPK) are meant to supervise the tax office.

Under current regulations, the BPKP and BPK only ensure the
compliance of the tax office with tax regulations and its
accountability in the use of state funds. The agencies do not
have the authority to follow up on corruption reports from
taxpayers.

The lead in combating corruption at the tax office is meant to
come from the Inspectorate General and the NOC. However, the NOC
is completely toothless because it lacks the authority to
investigate any reports or complaints from taxpayers.

The chairman of the NOC, Antonius Sudjata, told the Post
recently that based on its agreement it signed with the Ministry
of Finance in mid-2002, the ombudsman commission could only
forward taxpayers' complaints to the tax office, nothing more.

"Our task is to receive complaints from taxpayers and then
send them to the tax office to be settled," said Antonius, adding
that thus far the NOC had only received 18 complaints.

The Inspectorate General has more power than the NOC, as it
can investigate reports of corruption from taxpayers and penalize
those tax officials involved.

However, the office cannot function effectively because it
does not have the authority to seek evidence of corruption from
taxpayers who file complaints. The office can only investigate he
accused tax officials, without being able to confirm the results
of the investigation with the complainants.

The senior official from the finance ministry said that due to
these limitations, the Inspectorate General planned to propose to
the minister of finance that it be given wider authority,
including the power to seek direct evidence from taxpayers.

The Ministry of Finance's Inspector General Agus Muhammad did
not deny this plan.

Agus told the Post his agency had difficulty following up
complaints from taxpayers as it was unable to collect facts
directly from them without prior approval from the tax office.

"The Inspectorate General has received hundreds of complaints
from taxpayers, however, we are not allowed to directly seek
further evidence from them. We only receive one-sided evidence
from the tax office concerning the complaints," said Agus.

The Inspectorate General found irregularities totaling Rp 753
billion (US$88.5 million) and $119,818 at the Directorate General
of Taxation during the first nine months of 2003. In 2002, the
office found irregularities totaling Rp 1.97 trillion and $3.83
million.

Director General of Taxation Hadi Purnomo earlier said the tax
office, which is expected to collect Rp 216 trillion in taxes for
the state budget this year, did not need a new system of
supervision because the current supervisory agencies were
adequate.