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We need a sunset policy for tax office staff
A few weeks ago, Gayus Tambunan was not recognized but today he is a newspaper headliner
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few weeks ago, Gayus Tambunan was not recognized but today he is a newspaper headliner. His name was mentioned for the first time by former National Police chief of detectives Comr. Gen. Susno Duadji in a tax fraud case.
Gayus, a 30-year-old staff member at the Directorate General of Taxation, is implicated in a tax embezzlement of Rp 28 billion (US$3.08 million).
In response to this, there is a call to stop paying tax. Driven by unsatisfied feeling on poor performance of tax office staff, taxpayers are advised to stop allocating money from their income to the government.
It is easy to understand the reason behind such a campaign. However, such initiative will lead to a serious problem. Based on theory, there are at least two roles of tax.
First, tax is used for routine government expenditure such as salaries for government officials or purchasing goods and equipment for the government’s daily activities.
Tax is therefore the reason why we have police officers on the streets during peak hour or our troops defending outer islands.
Second, the government uses tax to provide public facilities from the smallest to the largest, from traffic lights on the streets to roads connecting cities.
We have to admit that our life is becoming easier with these public investments. It is hard to imagine if we have to build roads connecting our house to our office or to any places we want to go ourselves.
Tax therefore is useful since it leads to public investment and makes public service available. Tax is also used to maintain the quality of such service. If taxpayers are reluctant to pay tax, public service will be poor quality or even no longer available.
In Indonesia, tax is the main source for development funding. Six years ago, government revenue composition was 70 percent tax revenue and 30 percent non-tax/grant revenue.
Last year, tax revenue was already 74 percent of government revenue and non-tax/grants were only 24 percent. It shows how important tax revenue is for the government.
The percentage figures tells us how small the role of non-tax revenue is for development financing. The government cannot rely on this kind of revenue then.
The government is doing the right thing when it wants to boost tax revenue. Measured by the tax ratio indicator (share of tax revenue to the GDP), the government is viewing potential income from tax.
Currently, the tax ratio in Indonesia is still low, less than 12 percent. In response to this, the National Medium Term Development Plan 2010-2014, suggested the tax ratio to increase from 12.4 percent in 2010 to 14.2 percent in 2014.
As tax is the primary funds for development financing, any initiative to encourage people to stop paying tax will cause detrimental effect to government efforts in providing public services.
However, taxpayers’ concern that their money is not well administered should also be addressed.
The case of Gayus has shown that reform process at the Finance Ministry has not successfully achieved the intended result.
At the outset, it is expected that bad practice such as corruption and embezzlement will decline as remuneration for the officials is upgraded. The government then increased the salary level of officials at the Finance Ministry including at the Directorate General of Taxation.
However, this policy lacks punishment and therefore room for wrongdoing still exist. Most importantly, it also fails to make a drastic change of the mindset of the officials and the environment of the office. No strict punishment means if the opportunity is there, action will follow.
The issue now is not only how to boost tax revenue, but also on action to ensure the money collected from taxpayers will not flow to the personal pocket of tax officials.
The government needs to convince taxpayers that their money is free from malpractice or embezzlement.
Following regular framework as mentioned above will gain nothing. Unusual approaches should be implemented to break the walls.
How? The sunset policy might be one solution.
“Sunset policy” is the term used for a policy package provided by the Directorate General of Taxation. It launched the sunset policy in 2008 for the 2009 income tax file return.
The idea is to request non-registered payers to voluntarily register themselves as taxpayers. Reward will be given to these newly registered taxpayers. For instance, taxpayers with a registered number (NPWP) are free of fiscal tax should they want to go abroad.
Unregistered taxpayers, however, will need to pay fiscal tax higher than before.
The sunset policy has successfully increased the number of registered individual taxpayers from 8.8 million in 2008 to more than 12 million in 2009. In other words, the policy has attracted more than 3 million new taxpayers only in one year.
This policy contains a number of attributes. First, it provides a reward for those who show compliance. Second, a hard consequence is ready for those who fail to comply.
Third, the time interval in the implementation is short. People then are pushed to choose the two available options quickly.
We can apply these principles to tax office staff. The idea is as follows. The Corruption Eradication Commission (KPK) needs to conduct a thorough investigation of all tax officials. It can start with the Directorate General of Taxation head office.
Before the investigation commences, tax officials are allowed to voluntarily report if they have been involved in tax scandals.
Rewards will be given to those who offer the information, for instance, there will be no legal punishment for them if they report the case and give the money back to the government.
For those who do not want to report, the legal punishment will be severe. First, the culprits will lose their jobs.
Second, their properties will be confiscated.
Third, the legal process should be applied with life sentence as the minimum punishment and death penalty as the maximum.
Then we can expect to restore the trust of the people, in particular potential taxpayers. If the government fails to restore public trust on tax administration, the tax ratio will not increase and development funding will be in trouble.
The writer is an economics lecturer at Pelita Harapan University, Tangerang.
