The tale behind the budget tally

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The roaring lion in the Metro-Goldwyn-Mayer (MGM) Studio logo before a movie is screened always catches my eye. In a more realistic setting, I saw the big cats on the National Geographic Wild Channel snarling at prey that flocked in the darkness.

Those lions’ voices echoed in my head while President Susilo Bambang Yudhoyono was passionately presenting the draft state budget to the House of Representatives last week. The government proposed that over Rp 1,600 trillion (US$168 billion) be allocated for spending, mostly on routine bureaucracy, including civil servant salaries, energy subsidies and new airport construction.

This might be good news for the less fortunate people and subsidized gasoline consumers who still enjoying the subsidies. Perhaps, such spending will be icing on the cake for government employees who are going to earn an extra income along with the salary increase. Spending on infrastructure will, in the long run, support domestic and economic connectivity.

The question now is where does the money come from? There’s no way it gracefully falls from heaven into the state account.

The Directorate General of Taxation and the Directorate General of Customs and Excise are expected to bring in nearly 80 percent of the state revenue or more than Rp 1,100 trillion to be spent next year. Many may not know this huge goal is akin to climbing Mount Everest. In this country, collecting money from eligible tax payers is as challenging as hunting in the wild jungle. We need many strong lions to catch tax evaders, tax schemers and other tax fraud actors.

The taxpayers fearlessly cook their books without sufficient law enforcement from the tax office and the Attorney General’s Office (AGO), which technically has the right to bring them to court. This reality happens for two reasons.

First of all, there is a lack of constant support from the authorities for the tax office in dealing with high-profile taxpayers. The President once ordered the National Police to carry out a performance evaluation and audit of the financial reports of the institutions in connection with former tax officer Gayus Tambunan (The Jakarta Post, Jan. 18, 2011). Yet today, the investigation has apparently gone up in smoke.

Likewise, instead of providing support, the House has constantly blamed the tax office without offering real solutions. In fact, politicians take advantage of the scandals involving the tax office as a political ploy to win public confidence.

It was hard to believe when some politicians stormed into the Jakarta customs office, demanding the containers of illegally smuggled BlackBerry smart phones be released without paying duties and taxes.

Instead of upholding the tax law, the lawmakers violated it.

Tax officers have been left alone amid the crowded interests of the players. In their loneliness, when it comes to big cases of tax fraud, none of the tax officers dare to offer support. There is no longer a lion in every tax officer’s heart.

Second, there is a long-standing shortage of auditors in the tax office. Let’s think about these figures. In reality, there were over 18 million registered tax payers as of 2011 and only 6 million of them filed tax returns.

The tax office employs only 3,000 tax auditors to supervise the millions of returns, not to mention the scams of non-filers.

Since the amount of tax owed is assessed and calculated by the taxpayers themselves, the tax auditors’ job is to validate the figures. As more tax returns are filed every year, the more files are left unexamined as the number of auditors has failed to keep pace.

Another related issue arises in regards to specific sector returns. For example, oil and gas companies, which contribute a large portion of state tax revenue, file financial reports that require specific skills to examine, and an investigation of their books takes both time and resources.

What is particularly worrisome about tax return to tax auditor ratio is the dilution of both the quality and quantity of tax compliance, which has significant affects on the Rp 1,100 trillion revenue target.

Unless this is addressed, all the beautiful numbers and populist budget planning will turn into fiscal calamity.

We are often unaware of the inherent reality in imposing a tax system that no taxpayer voluntarily wants to give his or her money to the country. The intention to avoid taxes is mostly natural. It’s also the very reason why we need more highly-skilled tax auditors.

We need a broad variety of tax crime specialists to make sure taxpayers pay the correct amount so the government can keep fuel prices low, build 4,500 new classrooms for the sake of our children’s future or recruit 25,000 new police officers to fight the tax mafia. We also need to ensure our taxmen are easily sniffed out and caught whenever they abuse their power.

“The government will develop high quality assurances and acquire quality improvements in tax probes and investigations, and conduct strong and fair law enforcement,” the President said. This statement could signal the beginning of a war waged on tax fraudsters. Nonetheless, we haven’t yet seen how enforcement will go for real. Meanwhile, the enemies and vultures peacefully hover above the lonely lions.

The writer is a graduate of the State Accounting University (STAN), Jakarta.