The 21% Bali Tax Fraud Cheats
By Bali BS News
Aug 17, 2005, 08:04
This article about tax and service charge fraud in Bali is actually in response to an email sent to us by one of our readers (see: Bali Broadcasting Service Gets Mail).
There is an understandable perception by tourists coming to Bali that when they are told 21% (10% is sales tax, 11% service charge) of what they spend goes to the government and staff of the businesses involved, but unfortunately that is not true in many, if not most cases. Tax and service charge cheats are everywhere, and it is not just the small businesses that do it. We will explain to you just how the Indonesian chancellery and Balinese people are cheated out of millions of dollars every year.
The Overseas Agent “Cheat”
So you decide to book and pay for your hotel with an overseas agent. They advertise a hotel room at, say, US$121 per night including tax and service charge. So 10% ($10) goes to the Indonesian taxman does it? And 11% goes to the hotel staff in Bali does it? If, for one moment you think it does, ask for an Indonesian tax receipt from either the agent or hotel and see if you get one. After all, if 10% went to the Indonesian taxman, they would have a legitimate duty to issue and you a legitimate right to expect a tax receipt right? And if you can not get a tax receipt, please do not then insult the poor Balinese hotel staff further by believing they got their 11%.
The Twin Book System
Money given to agents, hotels, etc. often gets fully declared on one set of books, the ones for the hotel management. But not everything is declared on the other set of books, the ones the tax office is shown and by which it bases its tax bill. This practice is rife in Bali because; a) Tax officials may well be “bought” or told not question the declared earnings of a certain hotel or business, and b) Hotels and villas, especially those which are foreign owned or whose reservations and payments centres are overseas, can more easily take money outside Indonesia yet not declare it to the Indonesian taxman. It is not just an overseas fiddle, it happens all the time in Bali as well. How often do you get a genuine, numbered tax receipt when you buy something? So all the times you do not, 21% of your purchase goes to the government and staff does it?
The Service Charge Distribution Swindle.
Often 11% is added as a service charge, although you have a legal right to refuse to pay this and perhaps should. In order to make absolutely sure your gratuity to the staff does not get siphoned off in full or part, you could pay this directly to the staff themselves. But of course, how do you ensure fair distribution regarding the gardeners, maids, cleaners and other behind the scenes workers? Like the tax receipt, if you trust the hotel or other business to take and fairly distribute the gratuity, do you get a true receipt for this charge which hopefully guarantees it is separated from the item / service value? Also, the problem then is what happens to service charge money that does actually get into the staff’s pockets. Is it added up and divided amongst the staff equally, or do the directors / senior management of that company also get a share? And is the percentage share they get commensurate with the size of their salary? Whereby a large amount if not the majority of the service charge ends up in the pockets of the wealthy hotel / business owners and / or well paid overseas staff. Incidentally, 1% of the 11% service charge can be legally withheld from the staff by the hotel / business for breakages.
So how much of the money you thought was going in tax and to the staff actually does so? Would you believe below 50%? Actually, many estimates are that maybe as little as 10% of the total tax and service charges stated as being charged ends up in the correct, legal coffers.
The problem is there is no answer to this while corruption exists to such a great degree. The average tourist can not be expected to go around giving some money here and there to everyone themselves. Of course tourists just want the convenience of their food, etc. bills added to their final bill upon check out to include tax and service charges, and for that element to be distributed fairly and legally. But it is only by removing the rampant corruption and requiring every licensed business to use cash registers which record all transactions and automatically issue tax and service charge receipts, and for businesses to publish how much service charge revenue they took and how it was distributed, will the money ever end up where it should.
Please, do not go to Bali and kid yourselves the 21% gets legally appropriated. That you are supporting the staff of your hotel to the extent you pay for. Please, if someone tells you that your hotel room rate includes tax and service, demand; a) a proper Indonesian tax receipt from either the agent or hotel, and b) a statement that at least 10% of the 11% service charge will go to the workers in the hotel, but nothing to the directors or senior management. If you insist on going to Bali and can not do at least that, please do not try to hoodwink others into believing that you care about the future of Indonesia or the Balinese people. And if you can not get a tax receipt and / or service charge statement from a hotel or travel agent, think twice about fueling the corruption in Bali and also tell us who they are so we can publicly shame them here.