The city of Probolinggo is one of the poorest areas on the north coast of East Java, with the municipal administration only taking in Rp 16.31 billion (US$1.73 million) in revenue in 2003 and the average monthly income being less than Rp 500,000 per capita.
But the situation has not deterred tax officials in this city from blackmailing some corporate taxpayers, despite the fact that they could help lift local people out of poverty, and colluding with others to ensure lower tax bills in return for bribes.
Based on a report from the investigative division of the Finance Ministry's Inspectorate General – a copy of which was made available to The Jakarta Post – eight officials, including the local tax office head, are suspected of involvement in corruption.
The investigation started in March 2005 after the division received a report from the Office of the State Minister for Administrative Reforms to the effect that the local tax officials had inflated the real amount of income tax owed by a local Chinese-Indonesian businessman. For spurious reasons, the businessman was told he had to pay Rp 125 million (US$13,300) in income tax. But the amount could be drastically reduced if he agreed to pay the officials a bribe of Rp 35 million.
Unable to come up with the money, the businessman later tried to negotiate with the officials to get the bribe reduced to Rp 5 million – the normal amount paid by his fellow businessmen. The offer, however, was rejected by the officials.
Worried that the tax office would make things difficult for his business, he then reported the officials to a number of agencies, including to the Corruption Eradication Commission (KPK) and the police.
After an investigation by the Inspectorate General was launched, and eventually expanded to other cases, preliminary indications were found that the officials regularly demanded and accepted bribes from local businessmen to reduce their tax bills or help get them out of difficulties.
It was discovered out that the officials received between Rp 250,000 and Rp 8 million for every "service" they provided. There was even an official who acted as a tax "broker" and "consultant" for 80 local taxpayers, mostly gold traders in a traditional market, in order to help them evade their taxes.
Probolinggo tax office head A. Sjarkowi could not be contacted by the Post for confirmation as he was on the haj pilgrimage in Saudi Arabia.
Another official named in the report, Achmad Dimyati, refused to comment, saying that he was not authorized to discuss the case publicly.
It is still unclear whether the Directorate General of Taxation has taken any action against the officials.
The directorate has, however, sent a copy of the report to every tax office in the country. This is now being used by other officials to avoid being caught in connection with such "trivial" cases.
"Tax officials are reading the report to improve their corruption skills. It is actually a petty case and is not that complicated. But it shows that we should not make any errors when dealing with similar cases in the future," said a tax official.
The report shows that corruption in Indonesia's tax offices is not the result of the actions of unscrupulous individuals, or oknum as they are known here, but rather is systemic in nature and involves officials from the lowest to the highest levels.
A senior official in the Inspectorate General said that the Probolinggo report and other cases investigated by the inspectorate highlighted how corruption in the tax service was deeply institutionalized.
"The report shows that corrupt tax officials are no longer out of reach of the authorities. Similar cases have also occurred in other tax offices. This case merely reflects this," said a senior official in the Inspectorate General.
The inspectorate recently uncovered a corruption case in a tax office in Lampung's capital, Bandar Lampung, in which 19 officials have been implicated, including the tax office head. Potential state losses are believed to run to Rp 9.8 billion. – Rendi Akhmad Witular