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Cheating on Property Taxes

Tax Officials Cite Under Declaration Rampant in Property Transaction Tax Payments.

(9/28/2009) BisnisBali reports that tax officials are convinced that sorely needed tax revenues are being lost through the underreporting of sale and rental property transaction values subject to taxation.

Alleging collusion between sellers and buyers to understate contract values, Gede Suarta, the Head of the West Denpasar Tax Office said, "we don't know precise figures, but we do all know that many sales and purchase transaction values are under-reported.

He explained that taxes paid in such transactions are typically tied to the official assessed value of a property (Nilai Jual Objek Pajak-NJOP), a figure generally accepted to be well below the actual market value of a property.

The law currently assesses a 10% transactional tax whenever land is sold or rented, with 5% paid by the seller and the remaining 5% paid by the buyer.

Indonesian tax law mandates that every financial transaction be subject to taxation, with purchases or merchandise or services subject to a 10% value-added-tax (VAT). Many small traditional markets and mini markets, according to BisnisBali, still fail to apply the required tax charges.