Company fights lone battle against tax extortion
Rendi A. Witular, The Jakarta Post, Jakarta
While members of the business community are generally afraid to argue with tax officials and would rather compromise with them in case of dispute, a local businessman has launched an all-out legal battle against the tax office.
The Constitutional Court recently accepted a petition from health equipment supplier PT Apota Wibawa Pratama to review the legality of the tax tribunal, which it said had created unfairness and a lack of legal certainty for the business community.
Apota director B.Q. Vega told The Jakarta Post last week that his company had decided to go to law after it fell victim to what he described as "unscrupulous behavior" on the part of tax officials, who were using the tax tribunal as a tool for extorting taxpayers.
"We have taken into account all the risks and pressures that may result from our actions ... Our effort is designed to encourage others to join the fight," said Vega.
Apota's lawyer Denny Palilingan said the firm had decided to petition the Constitutional Court to overturn Law No. 14/2002 on the establishment of the tax tribunal, which he said was repugnant to the 1945 Constitution.
He said the Constitution only recognized five courts -- the criminal and civil courts (public courts), religious courts, military courts, administrative courts and the Constitutional Court.
"Since it is not among the courts recognized by the Constitution, the legal standing of rulings handed down by the Tax Tribunal is questionable," said Denny.
He said the tribunal would have to be abolished if the Constitutional Court overturned the law.
In a second hearing with Apota last week, the Constitutional Court decided to summon those involved in the drafting of the law, including Minister of Finance Boediono and a number of legislators from the House of Representatives.
According to Denny, the tax court law was unfair, as was evident from the provision preventing taxpayers from appealing against its rulings.
Another unfair provision was the requirement that a taxpayer had to pay 50 percent of its total tax bill before filing an objection with the tax court. This was considered as burdensome as it could disrupt a company's cash flow, he said.
The high cost of filing objections with the court had caused some businesspeople to prefer to bribe tax officials.
A source in the Directorate General of Taxation agreed that the 50 percent payment requirement had often been abused by tax officials to extort taxpayers.
The source explained that tax officials could inflate the amount of the arrears owed by companies in order to discourage them from going to the tax tribunal.
Companies that were unable to come up with 50 percent of the tax arrears before going to the tax tribunal had no alternative but to seek a compromise with tax officials, including paying them bribes.
In the Apota case, the company booked a loss of Rp 240 million (US$28,235) in 2000, but officials from the Mampang Prapatan tax office in East Jakarta said the company had to pay Rp 877 billion in corporate income tax.
Denny said that besides bringing the case to the Constitutional Court, Apota had also filed an objection with the East Jakarta Administrative Court over the size of its tax assessment.
The company is also planning to report officials from the Mampang Prapatan tax office to the police and the Attorney General's Office for extortion.
When contacted for comment, the secretary of the Directorate General of Taxation, Djazoeli Sadhani, said the directorate had yet to receive information on the case, but that he would verify the matter with his staff.