Legal Protection on Taxation in Indonesia

Tax is attempt of force or imposition conducted by the Government to its citizen guided by principles to limits arbitrariness. Article 1 Paragraph 3 of Indonesian Constitution 1945 (UUDNRI 1945) stated that Indonesia is a rechstaat. As a rechstaat, every Government conducts must be based on law. Besides, M. Friedman argues that the function of law are as social engineering, dispute settlement, and social control. From such functions, laws provides what so called “legal protection” as a means to achieve its functions. Further Soediman Kartohadiprodjo said that legal protection is also means to achieve justice. Therefore, Government as a law maker will provides means to conduct legal protection. In taxation there are two types of legal protections which are in preventive and repressive as regulated under Act No. 6 Year 1983 as revised several times until Law No. 16 Year 2009 on General Provision and Procedures on Taxation (KUP), both will be explained as follows.

1. Preventive

Legal Protection for
Government	Tax Payer
Fines for Right to corrects tax notification letter The correction of tax notification letter may leads to state loss if it’s conducted irresponsibly. Therefore Article 8 (2) and (2a) regulates that incase that the correction leads to state loss, the tax payer will get administrative fines inform of 2% interest each month. Guarantee for Right to installment and delay the payment In order to avoid the tax disavowal due to right of installment and delay of payment, the government can ask for collateral if its deemed needed by the head of the tax office. The collateral itself can be in form of hypothec, bank guarantee, mortgage, and also land certificate. Right of Preferential Article 21 of KUP hives the fiskus as the representative of the Government the preferential right. This right is applied when that the tax payer bankrupt. It means that when tax payer is bankrupt, the fiskus can ask the payment of tax debt payed first before other debts. Right of preferential According to Prof. Adriani derives from the government power or authority to maintain its survival for the sake of the citizen.	Right to corrects tax notification letter As mentioned in article 8 (1) of KUP, tax payer can corrects tax notification letter by giving written statement before Tax General Director conducting examination (by issuing Surat Pemberitahuan Pemeriksaan Pajak). Further Article 8 (1a) of KUP stated that incase that tax payer paid more than they supposed to pay, such correction must be submitted 2 years before the expired date of the letter. By such articles, government gives time to the tax payer to review their notification letter and also as the form of transpiration. Right to installment and delay the payment One of the principles of taxation is the implementation of tax must consider the economic situation of the tax payer. Therefore, Article 9 (4) of KUP and explained further in Financial Ministerial Decree No. 606/KMK.04/1994 and Tax General Director Decree No. KEP-53/PJ/1995 regulates that Tax General Director can give right to installment and delay of payment for tax payer under their request. Such request must be submitted in written form before the due date of payment completed with the reason of request. Restitution right This right is given incase that the tax payer payed the amount of tax more than they should pay. The Government must return the overpayment to the taxpayer. Article 11 (1) of KUP regulates that the government must return the overpayment under the request of tax payer under the condition that the tax payer do not has tax debt. In case that the tax payer has tax debt, the return of overpayment, will be used to pay the tax debt. Further article 11 (3) and (4) of KUP regulates that the restitution must be conducted 1 month after the restitution request submitted, in case that after 1 month it hasn’t been payed yet, the government must pay with 2% interest to the tax payer. The restitution request is regulated under Article 17, 17B, 17C or 17D of KUP. Right to get tax reduction and cancellation The tax calculation sometimes can be error. In case that the error was conducted by fiskus, based on Article 36 (1) of KUP and Financial ministerial Decree No. 607/kmk0/1994 Tax General Director based on his authority or based on tax payer request can reduce or cancel the error tax bill and mentioned the right amount of tax that should be pay. The request must be answered before 12 months after the request submitted, in case that the tax General Director reject the request, it must be completed with reasons to rejection. Right for Objection A different interpretation can leads to the different tax calculation between tax payer and fiskus. In order to protect the tax payer, law gives right to objection on SKPKB, SKPKBT, SKPLB, SKPN, and tax collection by third party. Such objection must be submitted to Tax General Director for one types of tax in one year. Right on Confidential Protection Pursuant to Article 34 (1) and 34 (2a) of KUP Documents, notes, accountancy that relates to tax payer must be keep kept its confidential since, such documents can disadvantages tax payer if its open for public. This right is limited with certain reason such as for hearing or inspection matters.

2. Repressive
1. The Role of Tax Court

Based on Article 2 Act No. 14 year 2002 on Tax Court (Law on Tax Court) stated that tax court is a court that enforce judicial power for tax payer or tax insurer that seek for justice in tax dispute. Achmad Suhari said that Tax Court has the authority to decide tax dispute for law suit and appeal.

1. Law Suit

Based on Article 23 (2) of KUP Law suit can be submitted relating to the implementation of tax collection by forced letter, letter of implementation of seizure, or the auction announcement, the decision deterrent in order to tax collection, issuance of tax assessment or decision letter that the issuance does not in accordance with the procedure regulated under the laws and regulations. The procedure of Law suit is regulated under Article 40 until 43 of Law on Tax Court.

2. Appeal

The Appeal Pursuant to Article 1(6) of Law on Tax Court is only for legal continuance of objection legal remedy (right for objection). The object of the appeal is Letter of Decision on Objection as the form of dispute settlement in objection body level. According to this Article, tax payer is the only party that has the right to pursue for appeal. Further procedure is regulated under Article 35 and 36 of Law on Tax Court.

Based on Article 33 of Law on Tax Court, Tax Court is in the first and las level. It means that the decision is final and binding and cannt be re-appealed (kasasi). However, there is still possibility to do Judicial Review (Peninjauan Kembali).

2. Alternative Dispute Resolution

To avoid litigation which is time consuming, tax dispute settlement also can be conducted through Alternative dispute resolution such as negotiation, mediation, conciliation, and arbitration.

Sources:

Y. Sri Pudyatmoko, Pengantar Hukum Pajak (Edisi Revisi), 2008, C.V. Andi Offset : Yogyakarta, fourth publication.

Adrian Sutedi, Hukum Pajak, 2013, Sinar Grafika : Jakarta, second publication.

Deddy Sutrisno, Indrawati, Bahan Ajar Mata Kuliah Hukum Pajak, 2009, FH UNAIR.

Act No. 6 Year 1983 as revised several times until Law No. 16 Year 2009 on General Provision and Procedures on Taxation.

Act No. 14 year 2002 on Tax Court.