There is still a degree of mutual distrust and suspicions between the taxpayers and DGT officials due to the behavior of a number of tax auditors.
he draft government regulation in lieu of law that will annul secrecy rules from laws on banks, and other financial services and capital markets, and give stronger authority to tax officials to access data on taxpayers from other government institutions has been submitted to President Joko “Jokowi” Widodo.
We understand and even support the idea that the Directorate General of Taxation (DGT) should first be empowered to upgrade its capabilities and competence, and be given access to data and information from financial service companies and other government institutions. Tax officials need such a mandate to be able to strengthen its law enforcement, especially after last month’s expiry of the tax amnesty.
Instead of making amendments to the banking law, which will take a long time, the regulation in lieu of law will immediately enable tax officials to open the financial accounts of big taxpayers who, based on preliminary data at DGT, should have joined the amnesty program but did not.
But the DGT should realize that the House of Representatives will still be able to revoke the regulation within 30 days of its promulgation if it is met with strong public opposition. And such resistance could be very powerful if the DGT does not fulfill the stronger mandate to improve tax collection in a just and efficient manner, and eventually lose the public’s trust.
The Finance Ministry, especially the DGT, should therefore immediately work harder to strengthen its technical competence and internal-control mechanisms to further improve its integrity and efficiency. Only with higher competence and efficiency will the DGT be able to gain greater public trust.
The DGT has admittedly made significant improvements in the quality of its governance, but there is still a degree of mutual distrust and suspicions between the taxpayers and DGT officials due to the behavior of a number of tax auditors. We understand that perception sometimes changes much later than reality, and this phenomenon takes place within the public perception of the tax authority.
We get the impression that the DGT internal-control (audit) division is not adequately empowered with the necessary authority and resources to detect and cope with tax officials who live way beyond their official means of income, to minimize malfeasance within the DGT.
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