Indonesia's new tax chief said on Monday he would take a tough stance against tax-dodgers in order to raise tax revenues, adding that the largest tax case in Southeast Asia's biggest economy will come to court soon. Mochamad Tjiptardjo, who took over as head of the tax department last month, must boost tax revenues significantly to meet the government's ambitious target in a country where tax evasion has been routine.
Tax and customs, two departments plagued by corruption for years, have been at the forefront of Finance Minister Sri Mulyani Indrawati's reform drive. By reducing graft and streamlining services, the finance ministry has increased revenue collection, but economists still see plenty of scope for improvement.
President Susilo Bambang Yudhoyono, who was re-elected in a landslide victory in July, said earlier this month that Indonesia must raise 729.2 trillion rupiah ($73 billion) in taxes for the 2010 state budget, up 12 percent from this year's target of 652 trillion rupiah.
To do so will require better law enforcement, Tjiptardjo said, adding that he plans to deploy "tax spies" abroad to track down tax evaders, and use technology to reduce graft and improve data collection. "We will uphold the law. In the US and other developed countries, the law is really enforced and that is what we're trying to do," he told Reuters in an interview.
Tjiptardjo did not give details of where he would step up his tax intelligence network. But many wealthy Indonesians keep their assets offshore in Singapore, Hong Kong, China and the United States. Local media have reported that some Indonesian exporters keep their funds offshore, mainly in Singapore, where the tax rate is lower.
Tjiptardjo said that other enforcement measures would include seizing assets of tax dodgers and closer monitoring of local government budgets to make sure that those companies which win government contracts pay the correct tax. He also said he planned to continue to improve the quality of tax officials employed and strengthen the department's information technology and database, with the help of World Bank funding.
The information technology project "will be ready by 2012-2013. This will minimise direct contact with tax payers," he said, adding that face-to-face contact between tax officials and tax payers provided opportunities for graft. The number of tax-registered companies and individuals rose to 15 million in July 2009, from 4.36 million in 2005 - the first full year of President Yudhoyono's first term - in a country of 230 million people.
But only about 40 percent of registered taxpayers actually pay tax. Tjiptardjo said that meant the tax department must continue to investigate tax evaders and take them to court. "In 2007, I brought 21 registered taxpayers to court and they were found guilty. None was acquitted. In 2008, 30 tax cases were tried," he said. He said he was dealing with 40 cases this year but did not give any details.
Tjiptardjo said the tax department's investigation into Asian Agri, a plantations group controlled by Indonesian tycoon Sukanto Tanoto, was a key test of the country's tax reform efforts. The investigation has dragged on for years because of the need for the tax office to collect watertight evidence, he said.
Tjiptardjo, 58, who was closely involved in the Asian Agri investigation, said the plantation firms have understated their 2002-2005 profits and owe at least 1 trillion rupiah ($100 million) in taxes. Asian Agri has denied any wrongdoing in the tax case. Local media have reported that the firm was considering an initial public offering this year.
"In regards to Asian Agri, it's still in progress. It's been too long but this is because it involves a large amount," he said, adding that the case would probably be brought to court either this month or next month. "It will be positive," he said. "Others will see that the government is being serious, that nobody is above the law. This is a test case."
Tjiptardjo took over from Darmin Nasution, a respected reformer who has moved to the post of senior deputy governor at the central bank. Nasution was instrumental in making sweeping changes in the notoriously corrupt tax department. Tax revenues, including from customs and excise, have increased, but the tax-to-GDP ratio has remained relatively stable at around 13-14 percent since 2002.
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