‘Ineffective’ Tax Tribunal Finally Set for Shake-Up in Wake of Massive Scandals

Jakarta Globe, Nivell Rayda, June 26, 2010 

After months of shocking reports exposing tax scandals, the Ministry of Justice and Human Rights on Friday finally announced plans to amend the “ineffective” 2002 Law on Taxation Tribunal, seen as the Achilles heel of tax collection.

“The current Tax Tribunal Law has not been effective,” Justice Minister Patrialis Akbar said after meeting the Judicial Mafia Eradication Task Force.

He said the law had several loopholes that allowed for tax manipulation and evasion.

Mas Achmad Santosa, a member of the presidentially appointed task force, said the problems included the tribunal’s confusing structure.

The body, which handles disputes from private firms and individuals over their tax obligations, is structurally under the Finance Ministry but administratively under the Supreme Court.

“This creates confusion over which institution has the jurisdiction to supervise the tribunal,” Mas Achmad said. “We want the government to sort out this conflict of authority so it is clear who has the power to sanction rouge judges.”

There is also the matter of conflict of interest, as the tribunal is housed in the ministry building and its members include officials from the ministry as well as the Tax Directorate General.

The task force has said that more than 60 percent of cases that go before the tax tribunal are decided in favor of the taxpayer.

Among the many anomalies the task force noted was that in more than half of the cases, the tribunal failed to bring tax officials in charge of the problematic cases to the stand.

Deputy Attorney General Dharmono said the investigation process of tax evasion cases was also problematic.

The Tax Directorate General has the authority to conduct the preliminary probe of tax evasion cases, while the National Police handles the later stage of the investigation.

But there is no clear regulation that dictates the procedure, leading to much confusion.

“Tax collection is far from ideal. We see that there are many areas which are prone to corruption and manipulation,” Dharmono said. “There is even no standard operating procedures with clear means to measure the performance of the tax investigators.”

The tax tribunal came under intense public scrutiny after the arrest of Gayus Tambunan, the rogue tax official who was one of the many case brokers operating within the Finance Ministry to win clients favorable judgments at the tribunal.

Several tax officials have been named as suspects for collaborating with Gayus, the latest being one of his superiors, identified as HN, and Maruli Pandopotan Manurung, the suspended acting head of the tax appeal department.

Teten Masduki, secretary general of Transparency International Indonesia said the tax office must restore its credibility by focusing on major tax evaders. “The ball is now in the Tax Directorate General’s hands. People will judge whether they are committed to reform by prosecuting big companies suspected of tax evasion,” he said.