House approves tax tribunal bill; new system to settle tax disputes

Dadan Wijaksana, The Jakarta Post, Jakarta

All ten factions of the House of Representatives approved a draft law providing for the establishment of a new tax tribunal on Wednesday during a plenary session, sparking hopes of a better and more equitable system for the settlement of tax disputes.

When enacted into law, the bill, which was first proposed by the government in October 2000, will serve as the legal basis for the establishment of an independent tax tribunal to replace the existing institution, known as the tax disputes settlement agency (BPSP), which comes under the authority of the finance ministry.

The House and the government agreed that Law No.17/1997 on taxation, the legal basis for the BPSP, still contained loopholes, thus leading to legal uncertainty and a lack of equity for taxpayers and losses to the state.

Under the present BPSP system, reports of unfair settlements in tax disputes have been rife, with taxpayers mostly ending up on the losing side due to their weak bargaining position.

On the other hand, closed-door deals in settling tax disputes could also result in financial losses for the state.

Minister of Finance Boediono stressed the importance of the House's approval for the bill, as it would mark far-reaching progress, especially as regards transparency.

"The new law will require proceedings in the tax tribunal to be open to the public, so that everyone can see what's going on," Boediono said after attending the meeting.

The current regulations require that cases involving tax disputes be heard in camera, with the possibility of unlawful deals between taxpayers and officials being ever present.

There have been complaints that both taxpayers and BPSP officials are not averse to respectively offering and accepting bribes for personal gain and at the expense of the state.

With the country pushing hard in its efforts to maximize revenue from taxes, corruption within the tax system constitutes a major problem.

Since the government has been running out of fresh funding sources to finance the state budget, tax collection has become the prime contributor to the budget's revenue side.

The tax tribunal would sit under the supervision of the State Administrative Court (PTUN).

Legislators agreed on the urgency of the new law to avoid further losses to the state and educate officials and taxpayers to act in accordance with the law.

"That's why we need this institution, which is to designed to provide a bridge between the interests of both taxpayers and the government.

"On the one hand, the government wants to increase revenue from taxes but at the same time also wants to improve the level of protection for taxpayers," Hatta Taliwang of the Reform faction told the meeting.

Under the bill, decisions issued by the new tribunal would be final and binding.

An appeal would, however, be allowed straight to the Supreme Court.

Such a review could only be undertaken once and only after the party involved had paid 50 percent of his outstanding taxes as determined by the tribunal.

This should provide more protection for taxpayers given that under the old law, an appeal could only be brought after 100 percent of outstanding taxes had been paid to the state.