The Jakarta Post
The alleged tax crime revolving around the decision of former Finance Ministry director general of taxation Hadi Poernomo to provide tax leniency to Bank Central Asia (BCA), the nation's biggest privately held bank, in June 2004, caused potential tax losses of Rp 3.45 trillion (US$299 million).
The losses were estimated by the Finance Ministry's directorate general of taxation in documents dated May 2007, copies of which were obtained by The Jakarta Post on Tuesday. Then finance minister Sri Mulyani Indrawati requested a full investigation following irregularities in the granting of income tax leniency to BCA by Hadi.
According to the documents, issued by the compliance and human resources transformation directorate, Hadi's decision went against existing tax regulations and caused huge losses in potential tax revenues from BCA between the 2000 and 2003 fiscal years.
The Corruption Eradication Commission (KPK) on Monday named Hadi a suspect in the BCA case immediately after he retired as chairman of the Supreme Audit Agency (BPK).
KPK deputy chairman Bambang Widjojanto said the agency was investigating the possibility that Hadi may have accepted kickbacks in exchange for approving BCA's request.
The KPK has only estimated state losses of Rp 375 billion ($32 million) as a result of Hadi's decision.
The case began when BCA submitted a request with the income tax directorate on July 12, 2003 for tax leniency as a result of bad loan restructuring worth Rp 5.7 trillion in 1999.
After an evaluation, the directorate announced on March 13, 2004 that it had turned down the request, only for the decision to be overturned by Hadi on June 17, 2004.
The KPK has focused its investigation on Hadi's decision to overturn the evaluation carried out by his subordinates.
BCA president director Jahja Setiaatmadja denied any wrongdoing on Tuesday, insisting that everything 'had been done in compliance with taxation law'.
Jahja also took the time to clear the role of Vice President Boediono, who was the finance minister in then president Megawati Soekarnoputri's administration at the time.
'We did not communicate with then finance minister [Boediono], with all communication being done with the taxation directorate general through letters.'
Vice Presidential office spokesperson Yopie Hidayat said it was 'too early' to judge Boediono's role in the case.
Taxation office director general Fuad Rahmany, as well as its spokesperson Kismantoro Petrus, could not be reached for comment.
Negative sentiment from the tax case dragged down BCA's shares on Tuesday, as they fell 1.1 percent to Rp 11,050.
In contrast, banking stocks closed 0.06 percent higher, pushing the Jakarta Composite Index (JCI) to advance 0.1 percent during the day.
KPK deputy chairman Busyro Muqoddas said the agency was also eyeing the involvement of BCA officials the case. 'They [BCA officials] will soon be summoned for questioning,' said Busyro.
The case has also fuelled speculation that it could taint Megawati and her Indonesian Democratic Party of Struggle (PDI-P), given her close relations with Hadi.
Hadi was among Megawati's favorite bureaucrats when she was in power, seen regularly accompanying her and her late husband Taufiq Kiemas.
PDI-P deputy secretary-general Hasto Kristianto refused to comment on the extent of Megawati's relationship with Hadi, saying only that it was 'a normal relationship between government officials.'
'During Ibu Megawati's tenure, the Finance Ministry, which oversees the tax office, did an outstanding job. The total tax revenues collected at that time exceeded the combined revenues recorded during the times of former president Soeharto,' Hasto said.
According to quick counts, the PDI-P won the April 9 election, garnering around 19 percent of the vote, followed by the Golkar Party with 14 percent and the Gerindra Party with 12 percent. President Susilo Bambang Yudhoyono's ruling Democratic Party pocketed around 9 percent of the vote.
State Secretary Sudi Silalahi denied that Yudhoyono had any role in influencing the KPK to name Hadi a suspect, saying the President had only learned about the case from media reports.
'The President was surprised to hear the news,' said Sudi.
Haeril Halim also contributed to this story.
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