Jakarta – Indonesia is drafting a regulation under which people who owe more than 100 million rupiah in taxes would be jailed for up to one year without trial.

The move comes amid concern that many taxpayers have been evading tax payments for several years, a burden to the cash-strapped government in Jakarta.

The government says it is owed a total of 17 trillion rupiah in tax arrears accumulated over the past decade, of which around 5.5 trillion rupiah is said to be owed by foreign companies and individuals.

Tax fraud and evasion are common in a country where only about two million citizens – less than one per cent of the population – have a tax reference number.

The Finance Ministry is working with Justice Ministry officials on a regulation for tax evaders to be jailed at state prisons. At the Directorate General of Taxation at the Finance Ministry, tax collection division chief Djangkung Sudjawardi said that the new law was aimed at forcing recalcitrant taxpayers to pay up.

The new law against tax evasion offences will enable the government to send delinquent taxpayers directly to prison.

The country's penitentiaries are under the charge of the Justice Ministry. Hence with the new regulation, the tax office can now use the prison to detain tax evaders, he said.

Under the new regulation, recalcitrant tax payers would be issued with a letter, asking them to pay their taxes within 21 working days. If the letter is ignored, the tax office will issue a 'distress warrant' for the taxpayers to settle their tax obligation within 14 working days. If the taxpayers still refuse to comply, he will be arrested by tax officials, accompanied by the police.

Mr Sudjawardi said that the government had introduced a regulation in 2000 to detain tax evaders. But tax officials had not been able to enforce it because of lack of coordination with the Justice Ministry officials. Because of this, the tax office have been punishing tax evaders by confiscating their assets and banning them from travelling overseas instead.

Last year, the tax office was able to recoup some 250 billion rupiah worth of tax arrears through the sale of confiscated assets of tax evaders.

Mr Sudjawardi said that from next month, his office would issue distress warrants and travel bans for 60 non-compliant taxpayers who owed the state 1.5 trillion rupiah. Fifteen of these are expatriates, mostly from the United States, he said.