T

he government has warned of harsh punishments for tax evaders who are turning down the opportunity to join the tax amnesty program, vowing to track their undeclared offshore assets around the globe through the Automatic Exchange of Information portal in 2018.

“All countries will be blunt [in disclosing offshore assets they are holding]. Therefore, there will be no mercy after March 2017,” President Joko “Jokowi” Widodo said in Balikpapan, East Kalimantan, on Monday, highlighting that the government would definitely impose harsh sanctions on tax evaders.

According to data from Directorate General of Taxation, 1,041 businesspeople from the coal and mineral industry have joined the tax amnesty program, resulting in penalty payments reaching Rp 228.6 billion. However, this only represents 17.23 percent of the total 6,041 businesspeople in the sector.

The Finance Ministry Regulation stipulates burdensome fines for tax evaders: up to 200 percent of evaded tax liabilities.

In addition to threatening tax- evading businesspeople with harsh punishment, the government has also warned tax officers not to abuse their authority by providing any illegal assistance to tax evaders to avoid their tax liabilities or fines.

The country’s tax authority is currently in the public spotlight as it is ordered to boost improvement in its governance following an alleged bribery case involving its official recently.

Finance Minister Sri Mulyani Indrawati said the tax authority had possessed a comprehensive system for more than a decade to fight misconduct in its internal body. The system, which includes ‘whistle-blowing’ – a mechanism that protects individuals who witness corruption – was built in both the tax office and Finance Ministry since 2005.

“I really hope that the whistle-blower mechanism can be carried out consistently so that we can keep public respect and trust,” she said on Thursday, adding that the ministry had tried to reduce direct interaction between tax payers and tax officers by using SPT [tax forms] and online registration for tax identification numbers [NPWP].

Sri Mulyani lauded the Finance Ministry’s Directorate General of Taxation for being committed to fighting misconduct in its internal body. She called on the tax authority to continuously evaluate itself and its work procedures.

The recent arrest of a sub directorate head at the Directorate General of Taxation for allegedly accepting a US$148,500 bribe to help a company evade tax arrears is not the first allegation lodged against a tax official.

Years ago, Gayus Tambunan, a convicted former tax official who is currently serving a 30 year prison sentence, attracted the public’s ire for bribing law enforcers to falsify passports and enjoyed time abroad when he was supposed to be in jail.

Tax reform is included in Sri Mulyani’s priority list to regain trust from taxpayers, which is also expected to boost the nation’s stubbornly low-tax base. At around 11 percent, Indonesia’s tax-to-gross domestic product (GDP) ratio is one of the lowest among its Southeast Asian peers.

With fears that the recent bribery case will negatively affect public trust in the tax authority, experts say the tax office can still improve its standard operating procedures through enhancing its IT system to manage its database administration.

“Administrative aspects of collecting tax should be completed online with IT-based data and [the tax office] should reduce manual bureaucratic tasks, which are often prone to corruption,” said University of Indonesia (UI) tax expert Gunadi.