Another Tax Mega Scandal
Without law enforcement, reforms to the taxation sector are meaningless. Hopes could evaporate if this scandal is not uncovered.
THE bureaucratic reforms announced by the ministry of finance almost 20 years ago appear to have failed to fully build a system of managing state finances that is clean and accountable. The same is true for a number of initiatives to improve the taxation system introduced by Finance Minister Sri Mulyani Indrwati after the revelations of the Gayus Tambunan tax mafia case 10 years ago.
This has been proved with another tax mafia scandal on an even more eye-opening scale. At the beginning of February, the Corruption Eradication Commission (KPK) named Taxation Directorate General Director of Extensification and Assessment Angin Prayitno Aji and head of the Tax Investigation Support and Cooperation Sub-directorate Dadan Ramdani as suspects. Although Finance Minister Sri Mulyani has suspended both men, the public still wants to know: why is embezzlement from our tax system still continuing?
The technique used by the tax mafioso was simple. They received payments for moving a number of companies to lower tax bands. Three companies that have been mentioned are Jhonlin Baratama, Gunung Madu Plantations and Bank Pan Indonesia (Panin). Jhonlin Baratama is a subsidiary of the Jhonlin Group owned by Andi Syamsuddin Arsyad, also known as Haji Isam—a tycoon who owns a coal mine in South Kalimantan. Meanwhile Gunung Madu is a sugar cane and sugar refinery company in Lampung, and Panin is a bank.
There are indications that Jhonlin paid Rp30 billion to reduce the amount of tax it paid in 2016 and 2017. In the 2016 tax year, Jhonlin should have paid Rp91 billion, but on the document issued by the taxation directorate-general, the figure is Rp70 billion. The following year, Jhonlin was declared to have overpaid its taxes by Rp59 billion, but it should have been only Rp27 billion. This is only the losses to the state from one company. After naming Angin and Dadan as suspects, the KPK is reported to be still investigating a number of other finance ministry officials and tax consultants responsible for manipulating the figures.
What is concerning is the strong suspicion that Angin and his associates were able to fiddle companies taxes thanks to the tax amnesty launched by the government in 2016. The new tax reports filed by thousands of companies and individuals were used as the basis for negotiation by these embezzlers. It is believed that during this process, there was bargaining and demands for bribes.
This is yet another tax mafia case within the taxation directorate-general. The fact that these continue to appear should have made policymakers realize that the key to bureaucratic reforms is the use of a carrot-and-stick approach. If carrots continue to be given while law enforcement does not happen, crooks will continue to seek opportunities.
Begun in 2002, the main achievement of the bureaucratic reforms in the finance ministry has been increases to the remuneration of its employees. The salaries of finance ministry officials have been steadily increased. One increase in income resulted from the implementation of performance allowances of up to Rp100 million per month. As well as this, the business process and the structure of the organization were improved.
But all of this is for nothing if there is no law enforcement. Weak-minded law officials have proved able to wreck every effort at reform and eventually to damage public trust. These tax crooks have learned from the decadence of Gayus Tambunan. When he should have been sitting in a jail cell in November 2010, he was photographed watching a Commonwealth Bank Tournament of Champions tennis match in Nusa Dua, Bali. On top of this, we know that not every company that paid bribes to him was investigated by the police. This type of piecemeal law enforcement does not create a deterrent effect. The peak was the initiative of President Joko Widodo to revise the KPK Law in 2019. This decision clearly weakened the main weapon in the eradication of corruption.
Therefore, do not take too much comfort from the performance of the KPK in the Angin case. Until the KPK uncovers every case linked to the tax mafia, we should remain skeptical about its seriousness. The tug of war of interests between investigators, the KPK leadership, and government officials mean it is not impossible that the investigation will go no further than officials at the level of Angin. It is possible that other cases will simply be ignored.
If this tax scandal is not thoroughly investigated, President Jokowi’s target to increase Indonesia’s tax ratio from the current 10 to 11 percent—one of the worst in ASEAN—will be even more difficult to achieve. Without serious law enforcement, tax reforms in this country will be nothing more than empty words.