Only strong, credible law enforcement and a more effective internal control system at the Tax Directorate General could contain the damage to the three-year sweeping tax reform, which has been touted as the paragon of bureaucratic reform.

 If the public perceives that the government is not serious about taking drastic measures to root out and prevent malfeasance at the Tax Directorate General, the entire bureaucratic and civil service reform program will be greatly doubted. Without a significant, steady progress in the overall bureaucratic reform, the country could be in for another bout of crisis, politically or economically.

The reform, launched in mid-2007 at the Finance Ministry, notably the tax and customs and excise duty directorate generals, was considered a model for upcoming reforms at other ministries and government offices. The outcome so far, before the recent revelation of Tambunan’s Rp 28 billion (US$2.8 million) corruption cases, was quite impressive, leading to the declaration of Sri Mulyani as the icon of reform.

However, as more evidence related to the cases was revealed, they point to various weaknesses within the reform and put the credibility of the whole program in question.

It turned out that the reform, which emphasized pay increase – tax officials’ take-home pay was increased to 10 times those of  other civil servants not yet touched by the reform policy – would not be effective in changing the mindset and morale of government workers.

The most glaring weakness is an ineffective internal control system that had  allowed a junior auditor like Tambunan to live an ostentatiously rich life, with $2.8 million in his bank account and owning hundreds of thousands of dollars worth of properties and motor vehicles, without his colleagues raising any eyebrows.

This means that the new system of administration put in place under the reform at the Tax Directorate General does not have a self-correcting mechanism. The internal control could have been more effective if the annual tax returns filed by tax officials were thoroughly examined to ascertain their origin of their wealth.

Yet more worrisome is that the mindset of most officials at the Tax Directorate General appears to be based on the old culture (before the 2007 reform) when the Tax Directorate General ranked on top of the most corrupt public institution in the country. Such a mindset does not see anything unusual or wrong with tax officers whose lifestyles are way above their official means of income.

It was also such a corrupt mindset that has enabled Hadi Purnomo, formerly tax director general and current chairman of the Supreme Audit Agency, to live comfortably without being under the law spotlight even though almost 95 percent of his $3.9 million assets were derived from grants from his relatives and family members.

The fact that Purnomo could have passed the House of Representatives screening recently to become the chief supreme auditor despite the questionable origin of his wealth simply reveals the corrupt mindset of our politicians as well.

As more information was available about Tambunan’s modus operandi, it has now become almost certain that Tambunan could not have worked alone. There are many other Tambunans and their syndicates within tax offices around the country, each probably led by a senior tax officer.

The manners and the speed in which Sri Mulyani takes corrective measures for the reform at the Tax Directorate General and the credibility in which law enforcers deal with those responsible for or implicated in the corruption, would determine the future of our overall bureaucratic reform.

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