Indonesia Tax Boss Wants to See Bank Records in Revenue Push

Indonesia’s tax chief is pushing for access to personal bank accounts and wants to track car and home purchases in his fight to catch evaders and boost revenue.

The department is asking parliament to amend the banking law to give it the right to get lenders to reveal customer account details, Ahmad Fuad Rahmany, the finance ministry’s director-general of taxation, said in an interview at his office in Jakarta late yesterday. Cooperation is also being sought from local governments and private companies to monitor buying of homes and vehicles, he said.

President-elect Joko Widodo must raise 1,380 trillion rupiah ($113 billion) of tax revenue to meet next year’s budget, which currently doesn’t include funds to make good on his promises to boost spending on health, education, ports and roads. Widodo, known as Jokowi, has pledged to increase the nation’s tax take to 16 percent of gross domestic product, from 12 percent in 2012.

“This is Jokowi’s homework: he must think about how to expand the taxation office’s capacity,” said Rahmany, who has been in the job since January 2011. “Our budget for 2015 was cut while our revenue target raised. Do you expect money to fall from the sky?”

Information Sharing

Some 5.3 trillion rupiah has been set aside for the office’s operations in 2015, down from 5.46 trillion rupiah this year, according to figures on the finance ministry’s website. Indonesia is seeking to raise its tax-to-GDP ratio to 12.38 percent in 2015.

Gaining access to bank accounts would pave the way for reciprocal information-sharing with other nations, Rahmany said. Some 47 countries including Singapore signed a pledge to automatically share financial information, including bank balances, dividends and interest income, with each other on an annual basis to prevent tax evasion, the Organization for Economic Cooperation and Development said in a May 6 statement.

“From the tax perspective, he might want to see all the transactions, but from an economics perspective, there is a possibility of capital flight,” said David Sumual, chief economist at PT Bank Central Asia (BBCA), the nation’s largest lender. “Infrastructure needs to be prepared to prevent outflow, but it has to be coupled with a tax amnesty.”

‘Empty Words’

Leniency on unpaid levies can only bring back funds kept overseas if coupled with access to bank-account information that allows the government to pressure tax evaders with legal action if they don’t participate in the amnesty, Rahmany said.

A previous request for access to bank accounts was turned down by parliament’s financial services commission, Rahmany said, adding that he hasn’t given up. A coalition of parties that backed losing presidential contender Prabowo Subianto currently control more than half of the legislature.

“They say they want to fight corruption, but we can’t even check bank accounts, so it’s only empty words.”

Current Investigations

Jokowi, who as Jakarta governor increased the capital’s tax take by 75 percent by moving collection online and improving oversight, plans to target companies in the mining, plantation, property and forestry sectors by upgrading the skills of tax officials in assessing financial reports, Arif Budimanta, a member of his transition team, said Sept. 19.

The tax office is currently investigating 10 “big companies” where there is a substantial amount of tax evasion, said Rahmany, declining to name them. The 59-year-old has a doctorate in economics from Vanderbilt University and was chairman of Indonesia’s Capital Market and Financial Institution Supervisory Agency from 2006.

Rahmany is one of several possible contenders for the finance minister role in Jokowi’s administration, according to a Bloomberg survey of 11 Indonesian analysts and academics conducted in July.

Missed Targets

Southeast Asia’s largest economy expanded 5.12 percent in the second quarter from a year earlier, the slowest pace since 2009. The nation signed agreements with local units of Newmont Mining Corp. and Freeport-McMoRan Inc. to resume exports, after banning shipments of raw minerals in January. Jokowi, who takes office on Oct. 20, has pledged to boost growth to 7 percent.

Indonesia achieved only 64 percent of its annual tax revenue target in the first nine months of the year because of slowing economic growth and weak exports, Rahmany said. It met 92.1 percent of the goal in 2013 and 96.5 percent in 2012, according to data on the tax office’s website.

“Indonesia has only achieved its tax revenue target twice in the last 12 years,” Rahmany said. “That clearly shows there’s a problem with how the government regards taxation.”

Indonesia’s 12 percent tax ratio compares with 12.9 percent in the Philippines, 16.1 percent in Malaysia and 34.1 percent in Denmark, according to World Bank data.

Staffing Levels

The office needs to triple its number of staff to 90,000 to be able to reach the 60 million individuals who are required to pay taxes, Rahmany said. About 60 percent of those people don’t pay any taxes, he said. A pledge by Jokowi to move collection online is positive but more staff are still needed, he said.

“We need a combination of good data and enough workers,” Rahmany said. “Websites can’t demand people pay taxes.”

The size of the sprawling archipelago of 17,000 islands and the complexities of the multipayment system now in place may complicate the office’s task. Indonesia ranks 137 out of 189 countries in a 2014 World Bank survey on the ease of paying taxes. Weak governance is leading to missed state revenue, New York-based Human Rights Watch said in a November report.

“Information is the key,” said Rahmany. “We need cooperation from other government institutions and corporations to share their data and enable us to verify taxes better.”