The official confirmation last week that tax auditors and state prosecutors were investigating possible tax crimes at Bumi Resources and its two coal mining subsidiaries — PT Kaltim Prima Coal (KPC) and Arutmin Indonesia — should be welcomed as part of a more vigorous enforcement of tax laws that the government launched in 2007.
However, the timing of the revelation of the tax investigation of the Bumi group was rather unfortunate because Aburizal Bakrie, one of its largest shareholders and the Golkar Party chairman, has become embroiled in a fierce affront with Finance Minister Sri Mulyani Indrawati.
Tax director general Mochamad Tjiptardjo’s statement about the investigation of the Bumi group, made only one day after the widely-publicized angry outburst by Sri Mulyani toward Aburizal, could wrongly be interpreted as an attempt by the minister to misuse her authority in order to pursue a personal vendetta.
Such an inaccurate perception, if allowed to linger, could eventually create hostile public opinion about the urgent need for a concerted effort to tackle tax evasion which is still quite extensive.
The Wall Street Journal quoted Sri Mulyani last Thursday as saying that Aburizal did not like her after she strongly resisted political pressure for her ministry to help defend Bumi shares during the stock market crash in October last year.
Sri Mulyani felt that Golkar, one of the largest factions at the parliament, had picked on her as the main target of the parliamentary inquiry into the Bank Century bailout in November 2008.
The real fact of the matter is that tax auditors had been probing Bumi’s tax payments from early this year after the tax audit of its 2007 financial report and tax returns showed strong indications of massive tax evasion.
The tax directorate general estimated that set against the over 40 percent increase in its net income of US$754 million in 2007, and compared to the tax payments by other large coal mining companies, the Bumi group’s tax payments were grossly understated.
The tax audits were first conducted at Bumi as the parent company and were later extended to its coal mining subsidiaries with the conclusion that the group committed tax evasion worth Rp 2.1 trillion ($210 million).
Bumi corporate secretary Dileep Srivastava himself acknowledged Sunday the tax issue was a long-standing difference of opinion between his business group and the tax authority over Bumi’s tax obligations.
In fact the KPC and Arutmin, after stubbornly resisting the tax auditors’ assessment for a few months, finally admitted the tax underpayment last month and settled their tax shortfalls amounting to Rp 1.05 trillion.
However, the payment of the tax shortfalls did not automatically close the case because the tax audits have been elevated to investigations of possible tax crimes by the Attorney General’s Office (AGO).
The tax office and the AGO should consistently pursue the tax evasion cases against the Bumi group either through the criminal court or a civil lawsuit that are both permitted under tax law.
Quietly settling the cases would only discredit the tax authorities and create suspicion that the government might resort to abusing tax audits and investigations for political bargaining or to silence critics.
