Challenges
for new tax office chief
Gatot Soepriyanto ; A lecturer
at Binus University and is currently pursuing a PhD at Monash University,
Australi;. His research is in the area of corporate tax avoidance
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JAKARTA
POST, 10 Februari 2015
Amid the political hurly burly and controversy surrounding
the nomination of Budi Gunawan for National Police chief, President Joko
“Jokowi” Widodo decided last week to select Sigit Priadi, a career tax
official, as the new directorate general of taxation (DGT).
The appointment did not attract much public attention even
though Sigit and his team are responsible for collecting about Rp 1.30
quadrillion (US$104 billion) in tax receipts, which make up 75 percent of the
total state budget revenue this year and represent a 20 percent increase from
last year.
The new DGT chief was selected through an open and
competitive selection process. The high expectations that are put on this new
official are clearly seen through the ambitious target set for the DGT for the
next five years to increase the tax ratio (tax revenues as a percentage of
gross domestic product) from about 12.5 percent now to 16 percent in 2019.
The ambitious target made it imperative for the DGT to
improve its administrative capacity and organizational capability. But it is
the acute lack of capable human resources that has always been the biggest
challenge for the DGT.
First of all, the DGT has always been severely
understaffed because it has only 30,000 tax officers to serve 2 million
corporate taxpayers and 25 million individual taxpayers or one officer
serving 900 taxpayers, which is a very high ratio despite the advantage of
information technology. The DGT has suggested that it should have at least
95,000 tax officers to be able to optimally manage the tax administration to
achieve its tax revenue target.
Acute lack of capable human resources is always the
biggest challenge for the DGT.
Second, to improve the tax administration’s institutional
capacity, a better training system is needed to upgrade the skills of tax
officials, especially because the competence and skills of tax officers
across the country vary widely from one office to another.
Nearly half of the DGT staff have not completed tertiary
education, while 14 percent have not even completed secondary education.
Given the low level of taxpayers’ voluntary compliance and the complexity of
business structures, there is an urgent need to upgrade the quality of tax
officers if the DGT is to achieve its collection target.
Finally, there is mismatch between the ambitious revenue
target and the acute lack of personnel. No wonder, then, that the tax office
has been perceived to be the poorest performing directorate general within
the Ministry of Finance. Public opinion polls also often cite the DGT as one
of the most corrupt public institutions.
The DGT therefore has been under stricter public scrutiny
both from the taxpayers and also the law enforcement agencies, such as the
Corruption Eradication Commission (KPK), especially after several senior
officers were caught in big corruption scandals.
The corruption scandals certainly have damaged the public
trust in the DGT. This unfavorable condition made the job of tax officers
much riskier, often prompting them to switch their allegiance to other
organizations, including corporations and local governments. This is a
regrettable loss to the DGT.
The three issues should be the main working agenda of the
newly appointed DGT chief before he can focus on DGT’s deliverables. Issues
in tax administration need to be addressed before going all out in netting
taxpayers.
The latest report from the World Bank’s “Paying Taxes”
survey ranks Indonesia as 160th out of 189 jurisdictions with respect to the
ease of paying taxes, down two rungs from last year’s survey.
Some viable solutions to tackle the problems have been
discussed by policymakers and scholars. One idea is to grant the DGT autonomy
or flexibility in human resources management. Currently, the regulations
governing DGT make it extremely difficult to fire officials, despite
inefficiency or corruption issues.
On the other hand, bureaucracy within the public service
system often makes the recruitment process very slow, resulting in
unnecessary vacancies for important positions for months on end.
By giving more autonomy to the DGT in human resource
management, covering such aspects as recruitment, dismissal, promotion and
rewards, managers will have the freedom to manage their staff in a
businesslike manner.
This is a performance-driven model for human resources
management. In addition, with the freedom to determine staff remunerations,
the DGT will be able to decide the level of staff pay and narrow the range
between top and bottom grades, which will enable DGT to attract and retain
good talent, particularly those with key skills such as accounting and IT.
As the biggest contributor to the state’s budget,
flexibility in managing its own budget without constraints from public
service budgeting regulations is also needed for the DGT.
This includes giving the organization control over its
buildings and equipment, instead of being dependent on the public works
department. Freedom to use its own judgment in managing the budget
accompanied with accountability will help DGT unleash its potential to
achieve the objectives of the organization. ●
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