Business

Most tax fraud cases involve
false invoices: Government

The tax office said Friday tax invoice falsification had become the most common violation committed by taxpayers in recent years, allegedly supported by “players” who were “familiar with taxation practices in Indonesia”.

Speaking in a discussion with reporters, Muhamad Kifni, head of the investigation division at the Directorate General of Taxation, said more than a half of 53 tax fraud cases investigated by his office last year had involved the falsification of tax invoices to alter tax obligation.

“Our investigation showed that some companies bought fake tax invoices from other parties to ‘prove’ their fictitious business transactions. In this way they were able to manipulate their value-added tax payments,” Kifni said.

Kifni added that it was difficult for the tax office to trace and arrest issuers of such false invoices since they were often made using false company addresses and even fake IDs.

“These people move very fast. Most of our investigations led to dead ends because they would immediately set up other bogus companies after realizing we were investigating their former clients,” he said, adding that his division could find up to 5,000 false tax invoice cases in only a year.

According to the tax office, in 2010, outstanding tax cases stood at 53 cases, with 16 of them declared convicted with a total state loss of Rp 424 billion (US$49.6 million). This year, as of April, outstanding tax cases stood at 57 cases with seven of them convicted with a total state loss of Rp 34.4 billion.

Last week, the North Jakarta tax office unveiled a tax fraud case involving a trading company, identified as PT LBC, that may have inflicted losses of Rp 29 billion (US$3.4 million) on the state.

The company allegedly sold falsified tax invoices for fictitious business transactions. The tax office said it was also investigating eight other companies suspected of involvement in the crime.

Two suspects in the case, a shareholder and an employee of PT LBC, are currently being detained by the Jakarta Police.

They are suspected of having violated articles in the general provisions and taxation procedures law on the issuance of false tax invoices, which carries maximum penalties of up to six years in prison and fines of up to six times the value of the fraud amount.

Kifni, however, denied speculation that the issuance of bogus tax invoices had become a practice “assisted” by insiders within the tax institution.

Other than falsifying tax invoices, other tax crime methods include the issuance and use of invoices that are not based on actual transactions, and other tax evasions by engineering sales or turnovers and increasing costs through fictitious expenses, Kifni explained.

The other, which involved heavyweight corporations, may involve internal tax officers that take bribes to help them reduce their taxes, just like that happening in the former junior tax official and graft convict Gayus Tambunan high-profile case, which dominated news headlines for months.

Most state income, amounting in hundreds of trillions of rupiah, came from taxes, which is managed by one of the most corrupt government institutions in the country.

Kifni said the office was striving to enforce the general provisions and taxation

procedures law, which “will be done using soft and hard measures”. “The soft manner includes urging taxpayers to pay their liabilities, and the hard way would be collecting and investigating,” he added.

The “hard measure” to force reluctant taxpayers to pay their mounting taxes, would have the government confiscating assets of the conflicting parties if the tax arrears are not paid as required,
he said, adding it would seize those who were involved in the crime and restrict them from traveling overseas amid the tax collection process.

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