A report prepared by the newly established investigative division of the Finance Ministry's Inspectorate General shows that there are various methods regularly used by tax officials to pillage potential tax revenue.
The report, a copy of which was obtained by The Jakarta Post, is based on an investigation conducted in 2005 in response to public complaints.
The first and simplest method involves collusion between tax officials and businesspeople in recording fictitious transactions purporting to show that the companies have credited their value-added tax to the tax office, which can be refunded afterward.
The method is more or less similar to those used in a recent high-profile scam involving collusion between businesspeople and customs and tax officials for the issuance of falsified export documents and the claiming of refunds from the Pademangan tax office in North Jakarta.
Based on the Inspectorate General's report, preliminary evidence was found suggesting the involvement of 30 tax officials in this kind of scam last year, with state losses estimated at around Rp 28.5 billion. The investigation excluded the Pademangan case.
"This method is not a typical scam by tax officials. It is not that complicated and the proceeds are not so huge compared to other, more complex methods. This is usually done by junior and less-skilled officials," said an auditor with a Jakarta tax office.
The Inspectorate General also found a more complicated scam in which taxpayers and tax officials colluded in falsifying tax payment documents, including tax transfer certificates (SSP) and tax transfer certificates for property and buildings (SSB).
With these, taxpayers can evade paying taxes but still obtain a legal proof of payment. The collusion also involves the falsifying of bank deposit certificates in order to lower tax bills.
Based on its investigation. the Inspectorate General identified 12 tax officials involved in such cases last year, with the state likely suffering at least Rp 24 billion in losses.
The favorite method employed by tax officials, however, is simple extortion. The officials intentionally inflate the amounts owed by taxpayers in order to push them to file a complaint with the tax tribunal.
But under existing regulations, they cannot file a complaint unless they have paid 50 percent of the inflated arrears. Given the huge cost of going to the tribunal, taxpayers are often reluctant to seek redress there.
Those who are unable to pay 50 percent of their assessed arrears have no alternative but to seek a compromise with tax officials by paying bribes, which, according to the report, could amount to between 10 percent and 50 percent of the inflated tax assessments.
Other favorite methods used by tax officials to feather their own nests include reducing tax assessments in return for bribes, or threatening to hold up a tax rebate for years unless money is handed over.
The Inspectorate General's report found that 40 tax officials were involved in such practices last year, with the potential losses to the state yet to be calculated. – Rendi Akhmad Witular/The Jakarta Post