Lack of independent supervision and messy management at the tax tribunal are widely blamed by tax officials as catalysts for corrupt officials to illicitly seek extra earnings.

Since full reforms swept the tax office in the middle of 2007, it is getting harder for recalcitrant taxpayers to collude with tax auditors, especially in Greater Jakarta, in paying less taxes.

Taxpayers and corrupt tax officials are seeking other loopholes in the reform system to enable their collusion to continue.

The tax tribunal is one of the facets exploited for collusion that is spiralling out of control, as seen in the recent case of tax official Gayus Tambunan and his cronies, according to Director General of Taxation Tjiptardjo.

Gayus works at the directorate of objection and appeal, allegedly brokering a deal with the tax tribunal.

“As it becomes increasingly difficult to fool the system, corrupt officials are turning to the tax tribunal to continue their illegal practices,” Tjiptardjo said.

The head of supervision and law enforcement at the Directorate General of Taxation, Wahyu Tumakaka, said collusion at the tax tribunal started at the tax office’s subdirectorates of objections and appeals where Gayus and his cronies worked.

He said that following tax reforms in 2007, tax auditors generally charged higher taxes to avoid being accused of colluding with taxpayers.

Auditors are appraised based on the amount of tax due.

“The higher the tax due, the better for an auditor carreer. For this reason, many taxpayers have filed complaints with the tax office and appeals with the tax tribunal over high charges,” Wahyu said.

“This process is exploited by would-be tax cheats and corrupt tax officials to take advantage of loopholes at the tax office and at the tax tribunal.”

After arguing with tax auditors, taxpayers bring their cases to the tax office’s sub-directorates of objections and appeals in order to get lower tax dues.

The sub-directorate of objections processes the taxpayer’s complaints within six to nine months.  

Kickbacks are frequently paid out so tax officials speed up the objection process by refusing to accept taxpayer complaints. Taxpayers need a declaration of this refusal in order to file an appeal to the tax tribunal, Wahyu said.

Gayus once worked at the sub-directorate, turning down around 90 percent of taxpayer objections.

The taxpayer then brings the complaint to the subdirectorate of appeals where the taxpayer pays out more kickbacks to tax officials if they succeed in influencing the tax tribunal decision in their favor.

While serving at the subdirectorate of appeal between 2007 and 2009, 70 percent of cases handled by Gayus went in favor of taxpayers.

To secure favorable outcomes, tax officials at the subdirectorate of appeals collude with tax consultants and court clerks to fix panels of judges who can be bribed easily.

Otherwise, tax officials and clerks engineer a case report to mislead  honest judges who are already overloaded with cases and have no time to go through the details of individual cases, Wahyu added.

As of February this year, 9,792 tax disputes were awaiting processing, up from 9,400 in 2009.

The cases are handled by 48 judges grouped in panels. Critics say at least 60 judges are needed.

Each panel hears three to five hearings a day.
Unlike other courts where judges are appointed and managed by the Supreme Court, the tax tribunal

judges are appointed, paid and managed by the Finance Ministry.

The ministry, however, faces difficulties recruiting professional and independent judges. Retired tax officials make up 90 percent of the tribunal’s judges.

However, there is no independent supervision of the tribunal, making it prone to abuse and illicit practices.

Tjiptardjo said 70 percent of cases that made it to the tribunal were won by taxpayers, implying that judges were part of a network of corrupt tax officials.  

Tax tribunal acting chief Djazoeli Sadhani declined to comment on the issue.

Businessmen, however, have voiced concerns over the tax office’s allegations of graft at the tribunal after the Gayus case entered the spotlight.

“These accusations only scare the judges and force them to side with the tax office,” Sofjan Wanandi, the chairman of the Indonesian Employers Association (Apindo), said.  

Businessman Hariyadi Sukamdani, who also heads the Indonesian Chamber of Commerce and Industry’s (Kadin) tax, customs and public policies, said that the scapegoating of the tribunal in the Gayus case raised concern among businesspeople that there were no institutions left to independently handle taxpayer complaints.

“The tax tribunal, our only hope for justice, is being undermined through unproductive remarks by tax officials,” he said.

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