Vincent Lingga
- The Jakarta Post
- Jakarta / Wed, February 27, 2019 / 09:05 am
Presidential candidate Prabowo Subianto, who has been campaigning vigorously for social justice and more equality in income distribution and asset ownership, turns out to legally hold cultivation rights for more than 350,000 hectares of land for 35 years in Aceh and East Kalimantan.
This finding, which was revealed in the second round of presidential debates recently, has prompted Indonesian Corruption Watch and several other civil society organizations to challenge incumbent President Joko “Jokowi” Widodo, Prabowo and their running mates to publicly reveal their annual tax returns to show their honesty.
Next month happens to be the deadline for individual taxpayers to file their 2018 personal income tax returns (SPT) and both candidates also must file their 2018 SPT before March 31.
The General Elections Commission has for the past five years required that all candidates running for presidential and regional head elections to submit copies of their SPT. However, the commission is not authorized to make the SPT documents public.
Strange, though, such tax clearance is not required for the estimated 300,000 candidates running for the legislative elections in April.
Certainly, like legally protected bank secrecy, tax laws do not allow for the publication of individual tax returns. But not a single law prohibits the two candidate pairs from reaching out to voters by voluntarily revealing their tax returns to ascertain their integrity.
As Indonesia is still perceived as one of the most corrupt countries in the world, such an unprecedented gesture of honesty and transparency could go a long way in winning the respect of voters.
Income tax returns are evidence of a citizen’s commitment to fulfilling their civic duties to the state and can serve as a good measure of integrity because the SPT documents must stipulate not only tax payment records but also all the fixed and financial assets of taxpayers.
The government does have the requirement that senior government officials and legislators annually submit the records on their liquid and fixed assets to the Corruption Eradication Commission (KPK).
But regrettably this bureaucratic requirement is rather meaningless, perfunctory at best, and not legally binding. Most officials, directors of state companies and politicians simply ignore it. Moreover, the KPK does not have the resources to audit and examine the asset reports.
SPT documents, however, are legally binding and whenever necessary can be audited by tax officials even though the taxation system uses the self-assessment principle.
The revelation in April 2016 that thousands of Indonesian businesspeople used the services of Panama-based law firm Mossack Fonseca to set up special purpose vehicles (SPV) or shell companies overseas makes it imperative for politicians and officials to now voluntarily reach out to the public to show their integrity.
True, shell or SPV corporations are not in themselves illegal and they often have legitimate business purposes. However, they were also notoriously known as the main players in the underground economy, tax evasion and money laundering, especially those based in tax havens such as Panama.
But still the lingering question is if those businessmen did not have anything to hide, why had they set up SPVs through Mossack Fonseca, whose clients were notoriously known either as big corrupters, money launderers or tax evaders.
Many of those who formerly owned SPVs in Panama are now legislative candidates.
Only 65.4 percent of the 16.3 million registered individual taxpayers filed their 2017 income tax returns by March 31, 2018 deadline, reflecting persistently low tax compliance even after the generous tax amnesty that ended in March 2017.
Yet more disappointing is that only 992,000 of the 10.6 million who filed their tax returns were self-employed professionals such as doctors, consultants, lawyers and businesspeople. The other 9.6 million were salaried employees whose income taxes were withheld by their employers.
This simply reflected the high incidence of tax evasion and was confirmed by the World Bank estimate that the government had been able to collect only half of the tax potential.
The low personal income tax return filings also reflect a low compliance tax culture, especially among highly-paid professionals and high net-worth individuals. This trend is worrisome because collecting more personal income taxes could actually help bridge widening income inequality.
No wonder, therefore, that personal income taxes contribute only around 10 percent to tax revenue and the tax ratio (revenue against gross domestic product) is only about 11 percent, the lowest in the ASEAN region.
The bizarre fact that over the past four years hundreds of legislators, senior officials and heads of regional governments have been convicted, or are being tried or investigated, on corruption charges makes it imperative for public officials to disclose their assets and prove their tax compliance.
As the public now see integrity and transparency as the most important character public officials must have, there is nothing wrong or strange for politicians to make public their annual tax returns to demonstrate their integrity.
We realize this is a sensitive matter. But as corruption will remain one of our biggest problems for the next decade, we need to build up pressure through public opinion to encourage senior officials and politicians to demonstrate their honesty by revealing to the public their annual tax returns and all their assets.
