Update COVID-19 in Indonesia: 4,223,094 confirmed infections, 142,413 deaths (06 October 2021)
17 October 2021 (closed)
Jakarta Composite Index (6,633.34) +7.22 +0.11%
USD/IDR (14,146) -6.00 -0.04%
EUR/IDR (17,335) +57.05 +0.33%
The tax crime case which involves Bank Central Asia (BCA), Indonesia's largest lender by market value and the second-largest bank by assets, is not expected to have a significant impact on the performance of the shares of BCA. Earlier this week, Hadi Poernomo (Director General of taxation from 2002 to 2004) was questioned by Indonesia's Corruption Eradication Commission (KPK) on allegations of accepting bribes in exchange for tax exemptions - worth of IDR 375 billion (USD $32.8 million) - granted to BCA.
These tax exemptions were granted to BCA in 2004 by Poernomo after BCA appealed against earlier tax bills from 1999. This appeal was conducted in 2003. Tax auditors found in 2002 that BCA underreported its 1999 profit by more than IDR 6.6 trillion (578.9 million). This discrepancy was mainly caused by the IDR 5.77 trillion in asset sales to the now-defunct Indonesian Banking Restructuring Agency (BPPN). The BPPN was part of a series of strategic policies taken by the Indonesian government in response to the Asian Financial Crisis that erupted in mid-1997. As a measure to cope with the scarcity of liquidity in the nation's banking system, Indonesia's central bank (Bank Indonesia) provided liquidity assistance loans to banks, while the Indonesian government instituted a blanket guarantee program for all bank liabilities, in order to curb further erosion of confidence towards the country's financial system (the government spent more than IDR 450 trillion for bailing out Indonesian banks during the crisis).
BCA's President Director Jahja Setiaatmadja stated that the bank had complied with the tax law by fulfilling its tax obligation and committed no crime based on the tax regulations that were applied more than a decade ago. He argues that because it was sold to the BPPN, there was no tax obligation at that time. However, the Indonesian tax office assessed differently. Setiaatmadja further said that in 2003, BCA still had IDR 7.81 trillion in tax loss carryover from 1998 and referred to a scheme that allows Indonesian companies to subtract losses incurred in a year from the next consecutive five years' taxable income in an attempt to reduce its tax payments, which implies that even if the tax office had rejected BCA's appeal, the loss carryover alone would have canceled out the tax office’s claim on inflated tax.
The KPK said it was highly suspicious for Poernomo to exempt BCA from paying certain taxes as identical claims from other Indonesian financial institutions were denied.
Since the start of the trading week, BCA's shares declined 1.34 percent, while the benchmark stock index of Indonesia gained 0.34 percent in the same period (up to 10:30 local Jakarta time on Friday).