Taxing Indonesia’s Democracy

By N Mark Castro

jgThe banner says it all.

According to Jakarta Globe, “the tax office quietly issued a new regulation last week to link taxpayers’ tax identification number with their time deposits balance, bypassing Indonesia’s formidable banking secrecy, as it attempts to meet an ambitious tax revenue target this year.

The Finance Ministry’s tax office has been trying to gain access to Indonesian banks’ information for years in order to canvas new wealthy taxpayers or find clues that individuals under-reported their taxes.”

Indonesia’s tax-to-gross-domestic-product is the lowest among the region, which is at 12%. It’s as if the entire nation is saying to the government, “We know where the money will go so forget it.”

But this seemingly innocent regulation speaks volumes about Indonesia’s fledgling democracy. Indeed, one can even argue it has good intentions.

Hell, too, is paved with good intentions, to paraphrase John Milton.

The job of the tax office is to ensure the contribution of the citizens for nation building.

So far, so good.

But remember Gayus?

gayus

This unrepentant and sneering tax official — Gayus Tambunan — was found guilty of corruption, including — get this — bribing his way out of bribery charges.

Gayus was a live format reality TV that captured the nation’s imagination while embarrassing then president SBY who was promoting himself as a graft buster. During the trial, Gayus managed to bribe his way out of jail dozens of times, including for overseas trips. Gayus eventually confessed to having helped powerful firms evade taxes, paying prosecutors and police officials, and relieving his stress by leaving his jail cell to watch an international tennis tournament in Bali.

The former low-ranking tax officer Gayus Tambunan even testified that he had amassed Rp 28 billion (US$3.11 million) from three giant miners partly owned by the family of Golkar Party chairman Aburizal Bakrie. He even complained as to why it was frozen.

Of course, not a single police detective in the entire police force of the Republic of Indonesia even bothered to question the alleged Bakrie group.

In any case, the prosecutors demanded to apply the fullest punishment possible for Gayus, which was 20 years. After all, not only did he embarrass the president, made fun of the laws of land, stolen from the contributions of the entire nation, and soiled the very institution that he represented.

He got 7 years instead.

Meanwhile, anyone caught doing drugs or selling drugs will be killed for the entire world to know.

WHY THE TAX REGULATION SHOULD BE FOUGHT

Indeed, I agree with the government’s efforts to go after tax evaders. Indonesia has suffered long enough. Indonesians have suffered long enough since it’s your average workers and citizens that are taxed heavily. Unscrupulous rich and powerful people seem to get away with it. Take it from Gayus.

But while I am of the opinion that creative efforts be implemented to ensure tax compliance, I strongly disagree with such an amateurish measure to link Time Deposits to tax numbers.

Aside from the ill-conceived plan, no one at the Ministry seem to bother with the issue of the right to privacy of the citizens. As it is, with proper legal and judicial channels, the Ministry — and the police — can easily obtain information from suspicious accounts of individuals. Indonesian banks have shown great leniency in working with the government on this; however, in the Ministry’s efforts to impress the president, they went on to insert a regulation without any consultation with stakeholders — or even, at the very least, some intelligent people.

WHAT’S AT STAKE

1. Right to Privacy | Human Rights – Privacy is a fundamental right. In many countries, privacy has become a different part of human rights, but they are still connected. In Indonesia, the Constitution is a first legal source.

While it may seem harmless at first glance, the repercussions to such violation is evident especially in a country where it is replete with history of abuse.

  1. Who’s to say that such information will not be used against you?
  2. Who’s to say that such information cannot be leaked? Exposing you and your family to potential harm from criminals?
  3. Who’s to say that such information cannot be obtained by others that hack either from the Ministry or the police?
  4. How efficient is the Ministry when it would resort to such lame tactic to get information? Clearly it shows it lacks both the creativity and tenacity to investigate. And the police? Oh, I forget, it’s the MOST TRANSPARENT AND LEAST CORRUPT INSTITUTION IN THE ENTIRE COUNTRY.

2. CAPITAL FLIGHT

Part of what used to impress me about Indonesia’s unique sense of corruption is its cultural component. Gift-giving has always been intrinsically embedded in Southeast Asian psyche. Indonesia is no stranger to this. But, despite a history of government corruption — from low to high level officials — the money has always remained in the country.

Corrupt money has found its way in new buildings, new apartments, new restaurants, new stores, retail stores, franchise brands, to name a few. It’s part of the reason you see so many gorgeous but empty facilities in the city. Or sits in the banks.

Corrupt money, at the very least, has generated jobs, stimulated the economy, loaned to farmers, or paid wages.

It has remained in the country, with few and minor exemptions.

With this new regulation, however, any corrupt official or unscrupulous businessman can easily transfer both his/her earnings, revenue, corrupt money elsewhere in the world.

And what’s stopping now average citizens from following suit, especially with ASEAN integration in the corner, making it easier for the flow of cash to move freely?

You may not support the notion of one’s privacy being invaded, but I do hope that capital flight scares you.

But as if to show the callousness of tax officials, Wahyu K. Tumakaka, an interim director in the tax office, dismissed the concern.

“If a person is scared, then he might not be a good taxpayer. If they have good intentions, what are they afraid of?” Wahyu said.

This is the trustworthy Wahyu K. Tumakaka.

Wahyu-K-Dirjen-Pajak

In the end, only one question remains:

Why should we suffer for the Ministry’s incompetence?

 

 

 

About Asmartrock

N. Mark Castro is the chief political communications strategist for PT AsiaLeads, a political and communications policy-making body based in Jakarta, Indonesia. He is also the Executive Director at the Southeast Asia Consulting Group, an investment advisory company assisting clients roll out their presence for the ASEAN Economic Integration in partnership with government. The views posted here are his own and do not in any way reflect the views of the companies he represents.

Posted on February 14, 2015, in General, Politics and tagged , , , , . Bookmark the permalink. Leave a comment.

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