Taufik Darusman: The Taxman Cometh

Jakarta Globe, Taufik Darusman, January 31, 2010

If taxes, like death, are an unavoidable uncertainty, so are tax evaders, which in Indonesia covers a wide spectrum that includes listed companies, legislators and large private and state corporations.

No sooner had it named — and shamed — the country’s 100 top tax-dodging companies, the Ministry of Finance then revealed that 113 lawmakers from the House of Representatives and 23 members of the Regional Representatives Council don’t even have tax registration numbers.

To be sure, whether or not legislators have a tax ID number (NPWP), their taxes are automatically deducted from their oversized salaries every month. But the mere fact that about 20 percent of House members have no NPWP says volumes about their personal and professional ethics.

If lawmakers were never role models for the public in the first place, despite their frequent claims to the contrary, they are even less so after the tax office’s revelations last week.

The legislators would have earned much-needed public sympathy by offering apologies and pledges to rectify the situation. Nothing of that sort, though, as Arif Wibowo, a legislator from the opposition Indonesian Democratic Party of Struggle (PDI-P), belittled the issue by blaming the ministry “for not being more proactive and informing the lawmakers directly of their legal obligations.”

Arif, who claims he has an NPWP, added that “many Indonesians are reluctant to pay tax due to inadequate government services.”

Clearly, Arif must think that taxes collected by the government are used solely to please his whims and not to build the bridges and roads that his chauffeured vehicle traverses to bring him to the House complex.

Every Indonesian who earns more than Rp 15.8 million ($1,700) per year is required to submit a tax return and pay income tax.

Legislators, for the record, can earn as much as four times that figure (about Rp 60 million) if one factors in the allowances they earn from taking part in House sessions, committees, regional inspection tours and other somewhat dubious activities inside and outside the House.

Employees in private companies are required to have NPWPs and pay their tax obligations. A completely different scheme applies to companies, private as well as state-owned, which is why many of them may tend to be lax in their fiscal responsibilities.

“As of December 2009, the 100 top tax dodgers owe Rp 17.5 trillion [$1.9 billion] in tax arrears,” Tjiptardjo, the Finance Ministry’s senior official in charge of tax matters, told a hearing last week with House Commission XI, which oversees finance.

Surprisingly enough, foreign companies that are known for their exemplary corporate governance principles, such as Siemens Indonesia, ING International, Mobil Exploration Indonesia and Deutsche Bank, also failed the tax office’s test.

Not so surprisingly, however, were the strong internal reactions, with Muhammad Said Didu, secretary of the State Enterprises Ministry, taking the lead.

Not only did Didu blame the tax office for practicing wrong accounting principles, he also claimed that the Finance Ministry had agreed not to tax unprofitable deadbeats such as PT Merpati Nusantara Airlines, plantation company Perkebunan Nusantara XIV, railway company PT Kereta Api and shipping company Djakarta Lloyd Shipping.

“Televisi Republik Indonesia is not even a state-owned company,” Sidu said in a statement that in a way raises a legal anomaly: If TVRI is neither a state nor a private entity, what is it then?

BNI president director Gatot Suwondo, the brother-in-law of President Susilo Bambang Yudhoyono, chimed in by speculating that the bank’s inclusion on the list might be due to confusion over taxation on a Shariah unit.

If the assertions by Didu and Suwondo are correct, the tax arrears bombshell dropped by the tax office is not only about recalcitrant taxpayers, but also about different interpretations of accounting principles on a national scale. So what will be the tax office’s future course of action?

“Warning letters will be issued, after which we will force them to pay or confiscate their assets, and ultimately freeze their bank accounts,” Tjiptardjo said.

“They must pay,” he added.

Whether that becomes reality in a country where deals and compromises are politically acceptable norms is a very doubtful proposition.

Taufik Darusman is a veteran Jakarta-based journalist.

The tax directorate threatened last year to expose candidates who did not have taxpayer numbers. (JG Photo/Safir Makki)

Related Articles:

More Than 100 Lawmakers Have Not Registered to Pay Taxes: Ministry

Officials Name The 100 Worst Tax-Dodgers

House to set up working committee for tax arrears

100 companies owe Rp 17.51 trillion in taxes