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Indonesia's tax reform is stalling, say critics

Publication Date : 16-07-2012


Critics have said that despite much-touted tax reform, in reality little has changed in the sector given the recent arrest of a middle-ranking tax official in Bogor, West Java.

Firdaus Ilyas of NGO Indonesia Corruption Watch (ICW) said the arrest of the head of Bogor tax office, Anggrah Suryo, who was caught accepting a bribe from a private company base on an insider tip-off, was not necessarily proof that an internal whistle blowing system was working.

"Despite the remuneration policy [applied in 2007] and the implementation of the internal monitoring system, tax mafia operations are still rampant in tax offices. It's an indication that tax reform has not progressed as expected," Ilyas told The Jakarta Post yesterday.

He said that the internal oversight system could do little against top echelon officials.

The Corruption Eradication Commission (KPK) has named Suryo a suspect in a bribery case after catching him accepting 300 million rupiah (US$31,800) from a private company staffer Endang Dyah Lestari late last week.

The bribe was allegedly paid to help Lestari's firm PT Gunung Emas Abadi (PT GEA), a mining company based in Bogor, pay lower taxes than its required amount, which was around 22 billion rupiah ($2.3 million).

Suryo reportedly demanded that Lestari pay 1.5 billion rupiah ($159,000)in tax.

The case has been handed over by the KPK to the West Java Prosecutor's Office.

Contacted separately, Harry Azhar Aziz, a member of the House of Representatives' Commission XI overseeing financial affairs, said that tax reform had failed.

"What are the indicators of its success? We never have indicators by which the success of the reform can be judged. I have repeatedly asked the tax office to come up with some indicators based on morality and productivity, but they’ve never submitted a proposal," he told the Post.

Aziz also doubted that the arrest of Suryo was the "fruit" of the whistle blowing system, and that the system could still be effective in the future.

He challenged the tax office to promote whistle blowers who had contributed to the arrest of the Bogor tax official to higher positions to prove that the reward-and-punishment system worked within the agency.

"A week from now, these whistle blowers must have higher positions," he said.

In the past few years, the tax office has not only been dogged by bribery scandals, but also illegal practices in tax disputes as well as unresolved tax cases that could potentially cause severe financial losses to the state.

The irregularities include tax evasion charges against PT Bumi Resources, PT Arutmin Indonesia and PT Kaltim Prima Coal (KPC), all of which have ties with Golkar Party chairman Aburizal Bakrie. The combined value of the potentially unpaid taxes is estimated to be worth 2.1 trillion rupiah ($222.1 million).

"To fix problems in the taxation sector, we not only need to reform the tax office, but also the police, the prosecutor offices and tax courts," Ilyas said.

Finance Minister Agus Martowardojo had earlier claimed that tax reform had been successful when looking at the results of several surveys. A survey on taxpayers' satisfaction, conducted by the Bogor Agriculture Institute (IPB) in 2011, showed that the tax office had scored 3.79 from the maximum score of 4.

Meanwhile, in a survey on the integrity of the public sector, conducted by the KPK last year, the tax office scored 7.65 out of 10, which was above the standard score of 6.

The tax office also received a positive review in the KPK's survey on anticorruption initiatives, conducted in 2010.


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