Cars, Not Bricks
But it’s just a fraction of the tax evasion problem.
In December, the CEO of state-owned airline Garuda Indonesia was sacked after allegedly smuggling a Harley-Davidson motorbike and expensive bicycles into the country on a commercial plane.
He was accused of using a subordinate’s name on import papers to avoid detection — and taxes.
Days later, Indonesia’s customs office said it had foiled a separate plot to smuggle dozens of luxury cars and motorbikes in mislabeled shipping containers to dodge more than $3 million in levies.
“We’re going to crack down on this illegal activity,” finance minister Sri Mulyani said at the time.
“The contents of the shipping containers were listed as bricks but we found cars instead.”
Last year, the Global Financial Integrity Report (GFI) estimated Indonesia lost some $6.5 billion in tax revenue in 2016 due to mislabeling on goods flowing in and out of the country.
The corruption-riddled Southeast Asian archipelago of more than 260 million is also one of the world’s worst for illegal movements of funds across international borders, according to GFI.
Indonesia has one of the lowest tax-to-GDP ratios regionally and the World Bank in January called for better tax collection efforts.
The call comes as parliament debates a raft of new legislation that would cut corporate taxes while making big internet firms pay more levies, part of a broader effort to cut red tape and loosen rigid labor laws to spur investment.
But raising domestic tax revenue is also key as President Joko Widodo kicks off a second term with plans for more costly infrastructure spending, including a planned move of the capital to Borneo island from congested Jakarta.