Indonesia jails tax dodgers in race to meet budget goals

JAKARTA: In the Dutch language, gijzeling means to take someone hostage. In Indonesia, that’s how authorities describe their strategy to deal with tax dodgers, throwing dozens of people in jail as part of a national crackdown.

Eight months after the government closed an amnesty programme that gave Indonesians a chance to come clean on their tax affairs, it’s taking aggressive action to deal with those who still haven’t paid up. Finance Minister Sri Mulyani Indrawati makes no apologies as she races to meet a 1,473 trillion rupiah (US$108bil) tax revenue target with just two months to go before the end of the financial year.

Where “compliance is very minimal, or there is no cooperation, we will start to do this gijzeling,” Indrawati said in an interview in Jakarta. Taxpayers were given fair warning, including an opportunity to participate in the amnesty, she said.

More than 50 people, including foreign nationals, have been imprisoned since the beginning of the year over unpaid taxes, while hundreds more have been banned from traveling overseas. The tax office has threatened to seize luxury cars like Ferraris and jet-setters returning home with Gucci and Prada handbags have been stopped by customs officials at airports and questioned about whether their purchases abroad have been properly declared.

Yon Arsal, head of compliance and revenue at the Tax Director-General’s office, said his officers are doubling down on efforts to make up a shortfall of almost 600 trillion rupiah for this year. As of Sept 30, they had collected 60%, or 876 trillion rupiah, of the 2017 target.

Excluding flows from the amnesty, tax receipts are up about 12 % compared to the same period last year, he said.

“We still have two months left and we are really focusing on compliance activities,” he said in an interview in Jakarta. “It is quite challenging for us. I won’t say that it is an easy jump.”

Indonesia has a long-standing problem with tax compliance. In a country of 260 million people, only about 16 million registered taxpayers were required to submit returns this year. Of those, only 11.3 million have actually paid their dues, official figures show.

The country also has one of the lowest tax ratios in the region. The government is forecasting tax revenue of 11% of gross domestic product this year and expects that to rise to 13%-14% by 2021, down from a previous goal of 16 % by 2019.

That compares with 17% in Philippines, 15% in Malaysia and an average of about 34% for countries in the Organisation for Economic Co-operation and Development.

In the first 10 months of the year, Indonesia temporarily jailed 53 people for failing to pay arrears, the Tax Directorate-General’s office said, without naming the people. Forty-five of them have since been released after paying up 230 billion rupiah, while eight remain behind bars, owing a collective 41 billion rupiah.