TEMPO.CO, Jakarta - The sheer power of the plantation mafia is apparent from the conduct of hundreds of oil palm companies in Riau Province. At a time when the state is trying to increase revenues, hundreds of these companies avoid paying taxes on their income, on value added and on their land and buildings.
Ridiculously, this has continued for years because hundreds of companies almost a third of the oil palm plantations in Riau do not have taxpayer ID numbers. The Corruption Eradication Commission (KPK) has said this might well be costing the state up to Rp15 trillion per year.
This state of affairs is made all the sadder by the indication that local officials and politicians are involved. They close their eyes and allow oil palm companies to make large profits. It is therefore no surprise that hundreds of such companies are able to operate despite having none of the required permits on the plantation, cultivation or location.
It is difficult to image how hundreds of companies would be able to operate without the knowledge of local officials or politicians. An investigation by the KPK oil palm coordination and supervision team revealed that some of the land they control is in conservation areas or protected forests. This goes against the principles of environmentally-friendly and sustainable plantation practices.
The conduct of the oil palm companies that have taxpayer ID numbers, but who do not file annual tax returns only makes the problem worse. This does not only happen in Riau, and most likely, it occurs in other regions. Evidence for this is the fact that of around 6,000 oil palm plantations, more than half of them have never filed annual tax returns.
The low level of the oil palm companies' compliance is a reflection of the total state revenues from this sector, which last year totaled only Rp22.27 trillion Rp9 trillion of which came from taxes paid by oil palm companies in Riau. This sum contributes two percent of total revenues from the commodities sector, despite potential tax income from the oil palm sector being far larger.
This is why the results of the investigation by the KPK must be used as impetus to reform the entire oil palm permit system in Riau. This must not stop at identifying companies which are not paying taxes. The government must find out who is behind these companies. This will prove any involvement of officials or politicians protecting them. The government should not hesitate to halt plantation activities in protected forests, because this is a test for the state and its ability to resolve similar problems in other regions.
Since Law No. 11/2016 on the Tax Amnesty came into force, the government has not been able to impose fines of two to four times the tax arrears. What it can do is to ensure that hundreds of oil palm companies participate in the tax amnesty program. They could be forgiven as long as they are prepared to declare their assets and pay their contribution.
This endeavor should improve the tax database, meaning the government can receive higher revenues from the oil palm sector next year. The government can allocate these additional funds to prevent the forest fires that break out every year. (*)
Read the full story in this week's edition of Tempo English Magazine
