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A Ritual of Tax Avoidance

Unregistered Accommodation Providers in Gianyar Blamed for US$7.8 Million is Lost Tax Revenues Each Year

(8/5/2012) Those in charge of safeguarding tax revenues in the Bali regency of Gianyar are being accused of being less than serious in compiling and monitoring tax rolls.

As reported by Radar Bali, the loss of hotel and restaurant tax revenues through under-collection has regularly come under scrutiny in Bali, with the regencies responsible for collecting these taxes unwilling or unable to collect the full amount of taxes owed by many tourism operators.

In the regency of Gianyar, the rapid increase in the amount of new accommodation projects and illegal commercial villas are being blamed for the shortfall in tax collection. This was confirmed by the chairman of the PDIP faction from the Gianyar House of Representatives (DPRD-Gianyar), Kadek Diana, who told the press that the “leakage” of hotel and restaurants tax happens every year.

“There are two possible explanations for this. Does the leakage happen because the taxes are actually collected and then corrupted? Or, is the true potential of hotel and restaurant tax missed because many of these business are not registered as tax objects?” Diana asked.

Diana thinks that the shortfall in tax potential is because many businesses in Gianyar are not listed on the tax rolls. He pointed to the large number of melati (inns), villas and home stays that have escaped registration. “Maybe the starred hotels are all registered, but what about melati hotels? What’s more, how about villas and home stays?” he asked.

He said figures provided by the Central Statistic Bureau (BPS) show there are many tourists coming to Bali, but at the same time the amount of tax leakage continues to grow. Many of these guests, he contends, are staying at accommodation providers that pay no taxes.

This problem, he explained, cannot be detached from the high level of permit and license violations taking place in Gianyar with hotels being built and operated without obtaining any of the necessary permits and licenses.

Suggesting a solution, Diana said those charged with securing the regencies tax rolls must undertake a thorough review of all accommodation operators in Gianyar. In addition, the system of tax payments for hotels and restaurants must be put on line.

As reported earlier by Radar Bali, the BPS has estimated that tax “leakage” in Bali exceeds Rp. 2.7 trillion (US$290 million) each year. In Gianyar alone, the estimated loss in tax revenues from hotels and restaurants is put at Rp.73 billion (US$7.8 million).

The BPS estimates the potential for tax revenues to be collected by hotels and restaurants in all of  Bali at Rp. 4.7 trillion (US$505million).