This interview series will explore the overwhelming evidence that TBI’s business model is based largely on not paying the taxes owed to the Indonesian government. The first part is with a former TBI Kuningan teacher and a manager who Luke Preece praised in such glowing terms in numerous work emails, but started calling “insane” once he turned whistle-blower on TBI misdeeds. This manager is well-placed to tell us about the tax shenanigans at their core schools.

Hi. Is TBI a tax cheat?

I can only speak about the income statements I have seen and it appears that they pay little or even no taxes at all some months. In one example they paid around $40 in tax on over $80,000 income, which is a fraction of 1% tax. I’ve also seen my own and other teachers’ group certificates over a number of years and they stated our incomes were about 20% of the real figure.

OK. Let’s start with the group certificates. How much did these group certificates state you earned per month?

I can’t remember the exact eight digit figures of course, but the annual total was around Rp 36 million. Now that works out at a salary of Rp 3 million per month.

How much were you actually earning per month at that stage?

I was earning at least Rp 14 million per month when I started. By the end I was earning just over Rp 20 million. But the figure on the group certificates was always wrong. Rp 3 million is only a fraction of what I was earning.

What were teachers formally told about these group certificates?

They were told just to sign them and not to worry about the actual figures. We were told “TBI would take care of everything”.

Can you think of any valid or legal reason why you would be asked to put your signature to a false declaration of how much you were being paid by the company?

No I can’t. I cannot think of any reason why TBI would ask its teachers to sign their name to fake figures unless some form of fraud was taking place. When I started there in 2007, there were no group certificates at all. It started later. I have often wondered if TBI wasn’t paying any tax at all at first and later on they progressed to paying a token amount. Like all the other teachers, I went along with it. I’m not making any excuses here. I signed the fake group certificates too.

Did any of the other teachers question these practises?

Yes they did. We were told to ring the Finance Department under Pak Reza if we had any further questions. I’m not sure if anyone ever rang up those guys. They certainly wouldn’t have got much sense out of them if they did. When I was manager I was instructed to tell people to ring Finance if they had questions. That was the standard line.

It strikes me that TBI would have to pay very little income tax on Rp 3 million salaries. On Rp 14 million a month the teachers would enter Band II of the the Indonesian income tax code and be liable to pay 15% income tax on earnings above Rp 50.000.000 per year. The average teacher should have paid around Rp 25 million in tax per year on the TBI Kuningan salary. But they were effectively paying next to nothing.

Do you think TBI lied teachers were only making Rp 3 million a month to avoid paying the great majority of income tax requirements under Indonesian law?

What other reason would there be to give teachers falsified group certificates at the end of each year? I simply cannot think of any other reason why they required all expat teachers to put their signatures to false group certificates. If TBI can explain this logically I would love to hear it.

Let’s go to the income statements. I noticed that under your leadership in 2011 TBI Kuningan was making 35% more revenue than just one year before when Wati had managed it under Luke Preece’s guidance. How did you achieve the rapid turn around?

Through a focus on our customers. I organized constant promotions and marketing to let our customers know that we valued them and valued their loyalty. I also made sure teacher observation schedules were carried out properly  to ensure teachers were progressing academically. I worked 50 hour weeks and really did everything I could to boost our image and profile.

There was one part of the income statement which I found astonishing. It said that TBI paid just $40 tax on income of around $80,000 in monthly revenue and over $20,000 in profits. 1% of revenue amounts to $800, so they were paying one-twentieth of one percent of revenue in taxes. Can you believe that TBI actually complied with Indonesian tax laws based on these figures?

No. I simply cannot believe it. They always blamed it on timing when I asked, and they said it would be rectified next month. They said the missing taxes would be added next month. But honestly the whole thing was dodgy. The amounts of income declared fluctuated wildly, and the teachers salaries also  fluctuated wildly from month to month on the income statement, but in reality the salaries were very constant. Why were salaries Rp 100 million more one month than the next on the income statement when they varied little in reality? There were also one-off expenses and charges running into tens of millions of rupiah which would appear on these statements. What was that expense I asked from to time? They would get back to me with “maaf, salah input“. (Sorry Mister, it was the wrong input.) These wrong inputs would total up to Rp 50 million rupiah. Nothing they ever did was professional or accountable.

Were they helpful and cooperative in explaining these accounting mistakes?

Not at all. They would usually pretend not to understand what I was even saying whether in English or Indonesian. If I persisted I would get the usual, “Salah input, Mister”, as if $5000 missing from an income statement was a small oversight. In fact that was a full-time Indonesian teacher’s salary for an entire year. Finally Luke advised me to stop asking uncomfortable questions.

Did you?

No I didn’t. Unlike him, I have a conscience to answer to.