[ppi] [ppiindia] How to buy the latest BMW 5 car at the age of 27

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The Jakarta Post
Friday, December 10, 2004

Graft spirals out of control at tax office

Rendi A. Witular, The Jakarta Post/Jakarta

Few people could afford to buy the latest BMW 5 car at the age of 27, no
matter how hard they work. But, Am, not his real name, can buy one
easily. He's a public official in one of the country's most corrupt
institutions: the tax office.

Officially, Am, who has been employed as a Jakarta tax official for
the past six years since graduating from the state-run
accounting academy STAN, receives a monthly take-home salary of about Rp
3 million (aboutUS$328). But he can easily make an additional Rp 500
million per year without even working for it.

Am's murky methods of making money involves either colluding with taxpayers,
or blackmailing them.

Am refused to elaborate, but according to Ade Sudradjat, an
executive at the Indonesian Textile Association (API), since 1998
tax officials have preferred to use the tax tribunal as a tool to
extort taxpayers.

Ade said that tax officials intentionally inflated the
amount of taxes owed by taxpayers in order to push them to file
a complaint with the tax tribunal. But, under the existing regulations, they
cannot file their complaint unless they have paid 50 percent of the
inflated arrears.

"Given the huge cost of going the tribunal, taxpayers
are thus usually reluctant to take their cases there, and those
who are unable to make the 50 percent arrears payment have no alternative
but
to seek a compromise with tax officials by paying bribes," he said.

Based on existing law and regulations, taxpayers can only file
complaints about errors or irregularities in their tax bills to the
tribunal, which, like the tax office, is under the Ministry of
Finance.

Ade and Am said going to the tribunal was pointless. They could
not give cases a fair hearing because the administration, salaries,
rotations and promotions of judges is handled by the ministry.

"With the current system, my advice to you is to pay the bribes.
There is no use filing complaints as even if you win, you will not get
your 50 percent advance payment back easily. It may take
years," said Am.

Tax officials' other method of making illegal money is
by lowering the amount of taxes to be paid by taxpayers in return
for a fee.

Ade said that this method was widely used by tax officials in the
1980s and 1990s, and remains a common practice for some tax officials
even now.

A noted businessman, who asked for anonymity, recalled
that tax officials once demanded bribes when he asked for his
tax refunds.
Unless he paid the bribes, the tax officials threatened to hold
up his tax refunds for years.

"It's was a bad experience. These people held money that I badly
needed to finance my business operations," the businessman said.

According to Am, illegally-collected funds are normally
distributed within the tax office with the tax collector getting 25
percent, his or her coordinator 15 percent, the section head 25 percent
and the tax office head 30 percent.

The tax office head would later distribute the money to the higher-
ranking officials, including the Directorate General of Taxation's top
officials.

"There are only two options for tax office officials:
you either jointhe club of corruptors and get rich, or
you stay honest and spend your entire career as a clerk in the tax office's
library.
I chose the first option," said Am.




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