Hasyim Widhiarto – Political rifts within President Susilo Bambang Yudhoyono's coalition camp have taken yet another uneasy turn after legislators recently agreed to a proposal asking for an inquiry into tax corruption. The Jakarta Post's Hasyim Widhiarto explores the issue.

Some have said the only thing that has recently distinguished the Golkar Party and the Muslim-based Prosperous Justice Party (PKS) is their commitment to tormenting President Susilo Bambang Yudhoyono at every turn.

Both parties, the second and the third largest members of Yudhoyono's Democratic Party-led ruling coalition, garnered support from other politicians to agree on a proposal for a tax corruption inquiry during a House of Representatives plenary session on Wednesday.

If the proposal is eventually passed, Yudhoyono and his ministers are likely to face further controversy, perhaps repeating a similar circumstance that occurred in late 2009 when politicians launched the Bank Century bailout inquiry committee, initiated by, among others, Golkar and PKS.

An inquiry committee would necessitate more than six months of intense questioning and investigation. The results of the investigation could potentially hold the President accountable and possibly lead to calls for his removal.

Many believed the Bank Century bailout inquiry was merely a bargaining chip to unseat reform-minded former finance minister Sri Mulyani Indrawati in exchange for support of keeping Yudhoyono and Vice President Boediono in place until their term ends in 2014.

The ruling coalition accounts for around 75 percent of seats in the House. Golkar and PKS jointly account for 29 percent.

But a pledge by the two parties to maintain stability within the coalition after the Century bailout inquiry now seems to be in question as politicians drum up support for the tax corruption inquiry. Legislators are slated to vote for the passing of the inquiry later this week.

"We are fighting for the inquiry in response to the allegations launched by the [President's] Judicial Mafia Taskforce saying that companies linked to the Bakrie family have tax issues," said Golkar cadre, deputy House speaker Priyo Budi Santoso, on Friday. Golkar chairman Aburizal Bakrie is the chief patron of the Bakrie family conglomerate.

The Judicial Mafia Taskforce has advocated investigation of Bakrie-linked companies for alleged tax evasion. The Bakrie group had been mentioned by graft-convict Gayus H. Tambunan, a former low-ranking tax officer who was found with suspicious bank accounts totaling almost Rp 100 billion (US$11.2 million). He was convicted of corruption and sentenced to 7.5 years in prison in January.

"We're not backing down on this one. The inquiry will also help clear my name and the Bakrie family from all the allegations of tax evasion," Aburizal said on Friday.

Legislators from House Commission III for justice, legal affairs and human rights, have repeatedly demanded Yudhoyono dissolve the Taskforce – but to no avail.

Suspiciously, it was Commission III that initiated the petition for the tax inquiry on Feb. 2, signed by 114 legislators, including members of the coalition camp. They believed such a committee was necessary to help uncover the suspected tax mafia ring behind Gayus.

Commission III also demanded to be involved in supervising a law enforcement probe of 151 companies, mostly foreign entities, whose tax filings had once been handled by Gayus.

House Commission XI for financial affairs joined the hype surrounding the inquiry as a follow up to their 11-month work plan that revealed a long list of violations committed by tax officials, including extortion of taxpayers during tax audits. Commission XI highlighted the deliberate reluctance of tax officials to process the payment of legitimate tax returns unless taxpayers offered kickbacks.

Commission XI legislator Melchias Markus Mekeng of Golkar blamed such violations for contributing to the government's inability to expand the country's tax ratio, which remained at 14.1 percent against gross domestic product (GDP) in 2009. The ratio is lower than neighboring countries Malaysia and Thailand, where the tax-to-GDP ratio stands at 15.5 and 17 percent respectively.

"If corruption continues at the tax office, how can we ensure the sustainability of our state budget?" Melchias asked.

Melchias said the proposed inquiry was also justified by an audit from the Supreme Audit Agency concluded on Dec. 10, 2010.

The audit covers tax collection and tax office valuation procedures for companies registering disputes with the office. The companies include PT Permata Hijau Sawit (PHS), Asian Agri Group, PT Wilmar Nabati Indonesia, PT Alfa Kurnia, PT ING International and Emma Hospital in Mojokerto, East Java.

"Many have blamed the six companies of committing tax crimes, but the BPK audit has shown otherwise. It's the internal system within the tax office that must be reformed," he said.

However, a copy of the BPK audit obtained by The Jakarta Post revealed that violations committed by the tax office during the process of evaluating the taxes of the six companies mostly revolve around the office's inability to follow minor administrative procedures.

For example, the tax office alleged that PHS engaged in fictitious transactions in order to secure tax returns. The tax office's allegation was based on the premise that, during a field inspection, the office officials could not find the declared address of PHS's apparent business partners, for whom the transactions were made.

However, the BPK audit said the results of the field inspection were not sufficient to conclude that PHS had engaged in fictitious business, unless there was confirmation from the relevant district office that the address of the business partner was indeed falsified.

PHS, which came under fire over allegations of a fraudulent tax return during the last days of Sri Mulyani term as finance minister, has repeatedly denied the accusations.

The BPK audit concluding that the tax office had committed serious errors in accusing the six companies of tax evasion was used by Finance Minister Agus Martowardjojo to justify the replacement of tax chief M. Tjiptardjo on Jan. 21.

There is considerable speculation, however, that the move was merely a gesture to help ease political tension between the executive and the legislature. Speculation is also rife that the unfavorable BPK audit had something to do with the strained relationship between Tjiptardjo and BPK chairman Hadi Poernomo, Tjiptardjo's former boss.

Commission XI member Kemal Azis Stamboel of PKS insisted the inquiry was a straightforward attempt to reform the tax office.

"Our party believes there is nothing political about the request [to establish the inquiry committee]," he said.

"The public must see the request as our attempt to push reform within the tax institution, as well as scrapping tax mafia practices so that we can boost our tax revenue in the near future," he added.

Charta Politika Indonesia political analyst Yunarto Wijaya, however, believes the establishment of the inquiry committee would not result in any significance for the public or the tax office.

"The factions which support the inquiry committee would only use this issue to increase their political bargaining position with the President, especially prior to a Cabinet reshuffle," he said. "I don't believe they will be serious in pursuing this," he added.