BKPM warns foreign companies over tax avoidance

JAKARTA. Indonesia’s Investment Coordinating Board (BKPM) is warning it will annul the investment permits of foreign companies that are proven to be avoiding payment of taxes.

"We are ready to revoke the principal licenses, but to prove a transfer pricing, as a tax-avoidance practice, is not the BKPM's job. It is the tax office that will hold the investigation, then deliver the results to the BKPM," chairman Franky Sibarani told thejakartapost.com on Monday in Jakarta.

Previously, Finance Minister Bambang Brodjonegoro said there were about 2.000 foreign investors who had avoided their tax liabilities in the last 10 years by declaring losses or changing names to get new tax allowances. The practices led to Rp 500 trillion (US$ 38 billion) in state losses.

By revoking principal permits, Franky said, all the following licenses would automatically expire. However, a company with a revoked permit could retain its assets under its name, but could not utilized them.

"They will have to sell the assets," he said, underlining that those 2.000 companies were on a list of foreign firms that committed the worst cases of tax avoidance.

Some milder cases were settled through mediation. "For these cases, we will help the foreign investors in mediation. We want them to continue operations," Franky said. (Anton Hermansyah)