Editorial: Perpetual corruption

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The head of the Bogor tax office, Anggrah Suryo, who was caught red-handed last Friday by Corruption Eradication Commission (KPK) investigators while accepting a Rp 300 million (US$31,800) cash bribe from the executive of a corporate tax payer was simply unlucky.

So were his colleagues Tommy Hindratno, a tax officer from an East Java tax office, who was arrested while accepting Rp 280 million in cash at a restaurant in Tebet, South Jakarta, early last month; Dhana Widyatmika, a tax auditor in Jakarta, who is now facing trial; Bahasyim Asifie and Gayus Tambunan, both already convicted of corruption.

Even though Taxation Directorate General Fuad Rahmany claimed Suryo’s arrest should partly be attributed to the whistle-blowing system within his institution, we don’t see any significant progress in the reform and “cleaning-up” of the tax office, which has long been perceived to be one of the most corrupt public institutions in the country.

Despite the headline stories on the trial or the arrest of corrupt tax officials, corruption is still perceived to be widespread within the tax directorate general, given the broad discretionary power of its officials in assessing tax obligations and in approving the refund of tax overpayments.

Jolted by the uncovering of almost $3 million in corruption and money laundering by a junior tax auditor, Gayus Tambunan, in early 2010, then finance minister Sri Mulyani Indrawati asked the financial intelligence unit to check money flows to the bank accounts of 15,000 officials involved in the various aspects of and phases of the tax assessment process as a concerted campaign to clean up the tax office.

Cross-checking the bank accounts of tax officials and their off spring against their annual income tax returns and the asset balance sheets that they have to file with the KPK could be more effective in uncovering whether they hid part of their assets or had ill-gotten wealth.

However, we have not heard anything from the examination so far.

Ask anyone who has relatives or family members working at the tax directorate general and it would be highly probable that two out of three would confirm that most tax officials live beyond their official means of earnings.

An acute lack of internal control has caused the costs of tax officials being caught at their corrupt practices rather negligible. Many tax officials could show off affluent lifestyles without raising the eyebrows or arousing the suspicions of their supervisors.

Corruption within the tax directorate general should be attacked simultaneously with several programs: strengthening the internal control system through a strong whistle-blowing program, as part of an early warning system on the conduct of officials with regards to ethics and wrongdoing such as corruption, and the periodical cross checking of the bank accounts of tax officials against their annual tax returns and annual asset balance sheets.

However, tax officials would hesitate or would not feel comfortable reporting on their colleagues, either because they had done such things or they did not believe their senior officials would act to follow up on their reports.

The most important factors to make the whistle-blowing system effective are to protect the identity of the tipsters and to act quickly and firmly to follow up on reports of wrongdoing, unethical behavior or the excessively luxurious lifestyles of tax officials.