Indonesia Threatens Jail Without Trial For Tax Evaders

01 April 2003 The Indonesian authorities have decided to take a tougher stance on tax evasion, and have introduced new draft legislation which could mean a custodial sentence without trial for non-compliance.

The government has decided to impose the draconian new measures as a response to a massive debt which it claims has mounted up from non-payment of taxes. Over the past 10 years, the government estimates some 17 trillion rupiah ($1.9 billion) has accumulated in tax arrears, of which 5.5 trillion rupiah ($620 million) is said to be from foreign companies or individuals.

According to reports, tax evasion is rife throughout the country, and of a population of 200 million, only 1% is registered with the tax authorities.

The regulation will supersede a similar law introduced in 2000, which has not been properly enforced due to lack of adequate liaison between the tax authorities and the Justice Department. Under the new law non-payment in the first instance will result in a letter requesting settlement of the tax bill within 21 days. Failure to acknowledge this will result in a 'distress warrant' that must be complied with inside 14 days. After this the tax department has the right to arrest the offender in conjunction with the police, and the delinquent taxpayer could then face a potential one year jail term.

The tax collectors will start to issue the distress warrants from next month. Their first targets are some 60 tax evaders who collectively owe the state 1.5 trillion rupiah ($168 million). According to Djangkung Sudjawardi, chief of the tax collection division of the Finance Ministry, 15 of these are expatriate foreign individuals, many of them American.