Finance Minister Sri Mulyani Indrawati, recovering from the fallout of the protracted Bank Century bailout probe by legislators, expressed anger at senior ministry officials for failing to inform her of the Gayus case five days after it hit newsstands.

Director General of Taxation Tjiptardjo, who was supposed to immediately inform her of the case, was overwhelmed to the point that an investigation into Gayus was not initiated until March 25, seven days after former National Police chief detective Comr. Gen. Susno Duadji hinted at the case.

A combination of grave omission and complacency on the part of tax officials over problems in the ongoing reforms as well as the complicated civil service law, making it almost impossible to fire a civil servant, have been widely blamed for the inability to sustain the pace of reform.

The tax office is probably the most difficult institution in which to implement moral reform, since corruption has been a custom there for three decades and most current tax officials have a history of graft.

“We admit there are loopholes in the reform that should be addressed immediately. We are now focused on taking such measures,” Tjiptardjo said Monday.

The head of staff expert for supervision and law enforcement, Wahyu Tumakaka, said corruption at the tax office took new forms and new players were involved in reaction to the reforms begun in 2007.
He said new ways of cheating on taxes stemmed from the inability of taxpayers to collude with tax auditors, especially in Greater Jakarta.

Auditors generally charge 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.

“It becomes natural for taxpayers then to seek other ways and other players to help them evade taxes. These players become a sought-after commodity by a market of would-be tax cheats,” Wahyu said.

At the same time, the tax office also has to deal with thousands of senior officials who are seen as unproductive, have a history of graft and long for the old days of widespread corruption, he said.  
“The tax office cannot cut this generation of bad seeds because of limitations in the legal system. So we have to wait until they retire,” Wahyu said.

Reform at the tax office is an initiative by Mulyani, who failed to get support for more concerted efforts from President Susilo Bambang Yudhoyono to immediately set up a legal infrastructure that would allow an overhaul of the country’s entire bureaucracy.

Three bills — on public service, governance administration, and amendment of the civil service law — are deemed crucial for laying the groundwork for fundamental changes in bureaucratic reform.

However, none has made it to legislators.

Wahyu said the impact from the inability to discharge unproductive officials due to legal constraints was devastating, as several of them were now helping taxpayers source new ways of cheating on their tax return forms and grooming a younger generation that includes Gayus to commit graft.

Gayus had worked for the tax office for five years, amassing more than Rp 28 billion (US$2.8 million). He has fled the country.

Wahyu also said unproductive officials were mostly located in tax offices outside Greater Jakarta, where tax revenue potential was not significant.

“Several of them have even been involved in brokering tax cases and instructing taxpayers on how to cheat on their tax returns,” he said.

Indeed, the 3-year-old reform is largely focused on areas of economic prominence, including Greater Jakarta, Bandung in West Java, Surabaya in East Java, and Medan in North Sumatra.

Tax offices outside the cities remain untouched by reform.

Tjiptardjo admitted that reform was mostly focused on Java, while other areas would need more time.
He also said there would always be corrupt officials at the tax office due to the ingrained culture of graft, which was unlikely to be entirely resolved in the short term.

The tax office currently employs  32,000 officials, with around 15,000 believed to have committed graft at some stage, Tjiptardjo said.

He said 4,500 auditors, 5,000 account representatives and 15,000 execution officials and supervisors were also prone to colluding with taxpayers to cheat on taxes.

Tax officials are paid between Rp 5 million to Rp 60 million, four to ten times higher than the salaries of other civil servants.  

The head of the Indonesian Chamber of Commerce’s taxation, customs and public policies, Hariyadi Sukamdani, said that to some extent, the high wages had actually managed to reduce collusion at the tax office.

“It is difficult nowadays to collude with tax officials. I haven’t seen any reports on collusion since the reforms began,” he said.

“However, the Gayus case is an exception. It may be the result of new method of operating involving new players.”

Indonesian Employers Association (Apindo) chairman Sofjan Wanandi said the Gayus case could be the result of complacency on the part of the tax office and the Finance Ministry.

“They lack focus on reviewing reforms. Most of their energy is spent chasing tax evaders,” he said.

He added that loopholes in the system could be traced to the inability of the tax office’s internal supervision  division as well as the Finance Ministry’s inspector general to detect new ways of cheating on taxes through the help of corrupt tax officials.

“In general, there are already improvements at the tax office in terms of service and transparency. There is also less collusion going on,” Sofjan said.

“However, the Gayus case might underline something systemic and ingrained. He may not be acting alone,” he said.

The President’s Judicial Corruption Taskforce concluded that Gayus colluded with 10 senior colleagues involved in the case long before reforms were instituted.

“I’m concerned that this case was not detected earlier, because there’s a strong bond among tax
officials to protect their colleagues regardless of the crime,” Sofjan said.

Loopholes in the reform

1. Stiff tax inspection without any room to compromise leads would-be tax cheats to seek new ways of cheat on taxes with the help of tax officials.
2. An absence of a legal infrastructure that would allow an overhaul of the country’s entire bureaucracy.
3. Thousands of unproductive tax officials need to be nurtured to prevent them from committing graft and colluding with taxpayers.
4. Discrepancies in information between tax officials, tax consultants and taxpayers, providing leeway for graft to occur.
5. Complacency among internal supervisors at the tax office and at the Finance Ministry.
6. Tax auditors often overdo their job, abusing their authority to plunder taxpayers in legal ways.

Popular

To my horror, it’s just a movie!

RI, Australia strengthen partnership on taxing crypto assets

Pentagon chief congratulates Prabowo on being elected President