The Tax Directorate General has acknowledged that there has been a decrease in the tax deposits from PT Indosat Tbk.'s revenues during the last couple of years.

However, tax officials have not yet carried out an investigation as there are not any indications of tax manipulations by Indosat, in which Singapore Technologies (ST) Telemedia owns the majority shares.

“We've collected the dossiers but they are insufficient as there must be indications of (tax) manipulation,” said Darmin Nasution, Tax Director General, Jakarta yesterday (5/6).

Signals of the state's losses due to Indosat's tax income and dividend shortfalls amounting to around Rp323 billion were brought up by Dradjad H. Wibowo, a member of the House's Banking and Finance Commission.

According to him, the potential income tax losses are Rp196 billion, the potential loss of revenue from dividends Rp65 billion and the potential loss of income tax from dividends Rp62 billion.

The losses were due to Indosat's mismanagement in carrying out derivative transactions.

Darmin asked that Indosat's tax manipulation allegation not to be taken for granted as it must be proved first.

“It's really a loss or a manipulation. Those must be differed. If it's a loss, we (Tax Directorate Genera) can't do anything. But the Capital Market Supervisory Board (Bapepam) might,” he said.

Wong Heang Tuck, PT Indosat Tbk.'s Finance Director, stated he was ready to be checked by Bapepam regarding Indosat's loss and tax deposit potential loss due to derivative transactions.

However, he denied that the losses were because of mismanagement or foreign currency speculation activities.

“Moreover, derivative transactions are not against tax rules,” he said after the nnual General Shareholders' Meeting (AGM) in Jakarta yesterday.

According to him, Indosat's derivative transactions were included in the financial statement submitted to Bapepam and the United States Security and Exchange Commission (SEC).

Indosat will continue carrying out derivative transactions until the end of Indosat's Dollar bonds I and II issuing terms.

“Indosat has the obligation of hedging at least 50 percent of the total long-term debt obligation.”

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Industry players hope that the government is serious in responding the proposal to abolish the industry fuel oil value-added tax (VAT) of 10 percent per liter.

The proposal for the fuel oil tax abolition was in response to the possibility of fuel oil price hikes in line with the increase of the Mid Oil Platts Singapore (MOPS) rate.

“Fuel oil price hikes would clearly put pressure on the industry's position. Therefore, we need policy alternatives to help smoothen the industry's cash flow,” said Thomas Darmawan, Head of Food and Beverages Businesspeople Association Chairman, yesterday (3/6).
On June 1, 2007 Pertamina increased fuel prices.

Diesel is up five percent from the previous level of Rp5.522 per liter to Rp5.797 per liter.

Pertamina increased the price in accordance to the price standard in Singapore of between 2.9 and 12.0 percent compared to the previous period.

The abolition of industry fuel oil tax, said Thomas, would not lower the state's revenues.

The reason for this is that 10 percent VAT will be imposed on ready-goods products.

“With production being smoother, the amount of production goods and the government's VAT will also increase,” said Thomas.

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The Tax Directorate General revealed several names of state officials who have not paid tax or submitted the Yearly Information (SPT) of Tax. “They also don't have a personal tax number (NPWP),” Tax Director General Darmin Nasution told reporters in Jakarta, yesterday (14/5).

Although he has pocketed the names, he refused to explain the identities of state officials who did not pay tax. He was also reluctant to give the details of institutions or departments of the officials who did not report their tax obligation by the Tax SPT because he will first report the cases to President Susilo Bambang Yudhoyono.

Regarding the names of civil officials of echelon IV up to I who neither have NPWP nor submitted Tax SPT, they will be reported to the respective ministry or state institutions. “This is a part of tax intensification to optimize the state revenue,” he said.

A House member, Andi Rahmat, said that the signals of state officials not paying tax have already been there a long time and this could happen. However, there is a possibility that the officials did not intend to break the law or avoid the obligation to pay tax.

The State officials generally have NPWPs. The problem is, he said, they are not accustomd to filling out Tax SPT. “Perhaps many ministers don't know how to fill out Tax SPT,” he said while mentioning that he already filled out his Tax SPT.

Therefore, he said that the Tax Directorate General must intensify the campaign of self assessment of tax much more. “Everybody must have an NPWP, especially those whose income exceeds the income that is tax-free,” he said.

He was sorry that Indonesia does not have a solid system yet like European countries which already implemented NPWP ownership. “In Europe, even people who want to make a call must show his or her NPWP, so they comply with the tax system,” he said.

He still supports the publication of the tax embezzlers. “The Tax Directorate General's findings must be revealed soon so that people feel the obligation to pay tax.”

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The Tax Directorate General at the Finance Department will concentrate on hunting down the main players in the Asian Agri Group tax embezzlement case, including the company's owner Sukanto Tanoto and the other shareholders.

Mochamad Tjiptardjo, Director of Tax Intelligence and Investigation at the Finance Department's Tax Directorate General, did not deny the possibility that the Asian Agri's owner could be legally charged.

”If there is proof, then why not? This is already classified as a criminal case,” said Tjiptardjo in Jakarta yesterday (15/5).

“The numbers of the suspects and the amount of the state's losses may increase,” he said

When asked the same question, whether or not the Tax Directorate General would also hunt down Sukanto Tanoto, on a separate occasion, Finance Minister Sri Mulyani Indrawati said, “We'll see how the Tax Directorate General handles the case. But clearly, the government will chase after payment of all the tax debts plus the fines.”

On Monday (14/5), the Tax Directorate General already stated that five Asian Agri Group directors were suspects of tax embezzlement. The five persons' initials are LA, WT, ST, TNK and AN.

Asian Agri is the second biggest holding company in the Grup Raja Garuda Mas – a company owned by Sukanto Tanoto, Indonesia's richest person in 2006 according to Forbes magazine.

According to Tjiptardjo, 18 members of the Tax Directorate General investigation team are working domestically and abroad to search for new findings in the case.

The legal base being used to charge the embezzlers, including those who asked for the manipulation to be carried out, he said, was Decree No. 16/2000 on Tax General Provisions and Procedures.

So far, according to him, the case development was only as far as the involvement of the five Asian Agri directors.

Signs regard new suspects have not yet been reached at this level of the investigation.

It is so far estimated that the state's losses amount to Rp786.3 billion, or around 30 percent from the total funds marked-up by the company which reached Rp2.62 trillion, but this amount could rise.

According to M. Salim, Director of the Attorney General's Office Investigators, the AGO is still analyzing public complaints about Asian Agri’s alleged corruption and tax embezzlement practices.

“We just received the reports last week,” said Salim.
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Up to early May 2007, the Tax Directorate General has found nine cases of fictitious tax invoices which caused the state to suffer more than Rp20.1 billion in losses. The five fictitious tax cases were in Medan, North Sumatra; one in Jambi; two in Lampung and one in Jakarta.

The Director of Tax Intelligence and Investigation, Mochamad Tjiptardjo, said in Jakarta yesterday (7/5) that tax officers were also finalizing the investigation into the fictitious tax invoice carried out by a consultant office in Jakarta. “We continue concentrating on this case as the loss is certainly higher (than the findings in the nine cases),” he said.

The findings in the fictitious tax invoice cases, he said, were based on the complaints, reports and information from the general public to the tax investigation officers during 2007. The mode of operation includes preparing annual notification letter on behalf of the taxpayer's name with the claim amount already arranged based on the taxpayer's request, also issuing and using fictitious tax invoices.

Based on the administration records of the Tax Directorate General, he said taxpayers, either a body or individual, who have become suspects did not have tax numbers or never submitted the annual income tax notification.

He stressed that every action of using fictitious tax invoices is subject to imprisonment in line with Article 39 Paragraph 1, Letter a,b and c in conjunction with Article 43 Paragraph 1 of the Decree No.16/2000 on Tax General Provisions and Procedures.

The Head of the Tax Investigation Sub-directorate, Ilhamsyah, said the perpetrators who abused the fictitious tax invoice have become suspects.
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