Part 1: Avoiding Paying Corporate Tax

Over the coming days we will be raising some awkward questions about the Menara Kuningan Income Statement which we leaked yesterday. It has already generated a lot of views and we see this as a good opportunity to level the playing field. Now everyone will gain a window into the murky and even inexplicable finances of TBI. The old assurances that TBI values its teachers and education and simply can’t afford new computers or better wages for its Indonesian teachers and staff will be exposed for the greedy and selfish fiction that it is. But today’s let’s start with perhaps the single most astonishing fact in that income sheet: TBI paid $43 tax on revenue of $69,750. (The US dollar figures are easier to get your head around we feel. Talking in hundreds of millions of rupiah is liable to make some readers confused, especially those in Europe or North America).

In 2010 Indonesia adjusted its corporate tax rate to 25%. 

http://en.wikipedia.org/wiki/List_of_countries_by_tax_rates

Now on the income statement profits were, of course, far from $70,000. There are some mysterious and unexplained fees being taken out every month. These ‘mystery fees’ are almost as large as the entire expat teacher salary bill and we will take a close look at them tomorrow, but even with some completely inexplicable deductions being made, the income statement mentions that there was a profit of around $8000. That means the school is paying less than 1% tax on profits in a country with a corporate tax rate of 25%. Luke and Ashley have cancelled raises for teachers after 2 years working for the company at the same time as TBI is avoiding its tax obligations to the Indonesian state. 

Now perhaps they will say, ‘Oh yes, but TBI is registered as a charitable foundation. The profits we gained from TBI Menara Kuningan were invested in other schools and other projects.’ But we have already covered how the UIC Design School- a white elephant run by Ibu Ning’s own children- was getting billions of rupiah from TBI in 2011. So the whole system is one of taking the revenue from TBI and diverting it to Ning, Mariam and their cronies, where it just disappears without any real transparency or accountability.

Now that covers the bizarrely low amount of corporate taxes being paid, but of course Indonesian also has income taxes and sales taxes and there is no mention of these on the income statement either. We will come back to these missing items soon.