Country Report Indonesia February 2011

The political scene: A corrupt tax official is imprisoned for seven years

On January 19th a court in the capital, Jakarta, sentenced a low-ranking tax official, Gayus Tambunan, to seven years in prison for bribery and other offences. Prosecutors had sought a 20-year sentence and, after the verdict was read out, Mr Tambunan thanked the judges for their leniency. The bribery incident occurred in March 2010, when Mr Tambunan paid a judge to acquit him after he had been accused of helping companies to evade taxes. He then fled to Singapore, but was eventually arrested and put on trial for a second time. Ahead of his second trial, Mr Tambunan provided evidence of a conspiracy to defraud the state of vast tax revenue, implicating former colleagues in the tax department, as well as around 150 local companies. Firms whose accounts Mr Tambunan managed included three mining companies, Bumi Resources, Kaltim Prima Coal and Arutmin, all of which are owned by the family of the chairman of the Golkar party, Aburizal Bakrie. (The Golkar party is a key member of Indonesia's governing coalition.) During questioning, Mr Tambunan allegedly confessed to receiving bribes from these firms in exchange for favourable tax treatment.

The case, which has become a cause célèbre in Indonesia, has exposed the failings of the government's efforts to curb corruption. It has also inflicted particular damage on the credibility of the president, Susilo Bambang Yudhoyono, who was re-elected in 2009 partly on the basis of promises to curb graft. Following the court's decision, Mr Yudhoyono ordered the investigation of companies allegedly linked to Mr Tambunan, as part of a 12-point programme to combat tax evasion. As part of the measure, Mr Yudhoyono asked the vice-president, Boediono, to co-operate with a task force on "judicial mafia", led by a former government minister, Kuntoro Mangkusubroto, to oversee all ensuing tax investigations. He also said that the Anti-Corruption Commission (KPK) and the Financial Transaction Reports and Analysis Centre (PPATK) would play a greater role in future investigations. Boediono and Mr Mangkusubroto are well-respected figures. Their oversight, as well as the involvement of the KPK and PPTAK, has raised hopes that future tax investigations will be pursued more rigorously. However, any investigation of the Bakrie-owned firms could put further strain on the governing coalition.

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
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