Taxation and the Trust of Scholarships
The controversy involving recipients of scholarships from the Education Fund Management Agency (LPDP) touches on the moral sensitivities of society. On one hand, the public views scholarships as a trust of state funds sourced from tax revenues.
On the other hand, there exists a legal reality regarding the tax status of Indonesian citizens living and working abroad as regulated under the Regulation of the Director General of Taxation No. 23/2025 (PER-23/2025) issued by the Directorate General of Taxation (DJP).
To understand the tension between legal norms and public moral expectations, relevant theory is Eugen Ehrlich’s living law theory and the sociological jurisprudence approach of Roscoe Pound. These theories emphasise that effective and legitimate law is law that aligns with values, customs, and the sense of justice that lives within society.
Public Morality as Living Law
According to Ehrlich, the law that truly lives is not only that written in legislation, but rather social norms that develop and are recognised by society. In the context of LPDP, there exists a strong collective morality: education funds sourced from taxation must return to benefit the nation.
Society views that LPDP recipients have a moral responsibility to contribute to Indonesia. When scholarship recipients settle abroad, public reaction is not merely a legal matter, but reflects living law—values of mutual cooperation, reciprocity, and social solidarity embedded in Indonesian culture.
Within this framework, taxation is understood not merely as an administrative obligation, but as an ethical contribution to the state. Therefore, the public tends to judge that beneficiaries of the state budget should remain part of the national contribution system, including through tax compliance.
Positive Law and Response to Social Morality
PER-23/2025 objectively regulates criteria for Domestic Tax Subjects (SPDN) and Foreign Tax Subjects (SPLN). Status determination is not based on moral sentiment, but rather on facts such as permanent domicile, principal place of business, and tax subject status in another country.
However, the sociological jurisprudence approach of Roscoe Pound asserts that law must be a tool of social engineering. This means law needs to balance three interests: public interest, social interest, and individual interest. In the LPDP controversy, there are three intertwined interests:
Public interest, namely maintaining state revenue and fiscal equity.
Social interest, the public’s expectation that recipients of public funds contribute in return.
Individual interest, namely citizens’ freedom to determine their place of residence and economic activities.
PER-23/2025 attempts to organise this balance. Indonesian citizens who are genuinely permanently settled abroad may be designated as SPLN, but on condition they fulfil their tax obligations whilst still holding SPDN status and obtain an official certificate. This mechanism prevents tax avoidance whilst recognising the reality of global mobility.
Meeting Point Between Law and Morality
If analysed with living law theory, the legitimacy of a regulation is highly dependent on public acceptance. If the public feels that law is too lenient towards LPDP recipients settled abroad, trust in the system may decline. Conversely, if law is too rigid and ignores objective facts, it risks being unfair to individuals.
The meeting point lies in transparency and consistency. Public morality demands accountability; law responds through clear and verifiable procedures. As long as tax status is determined based on actual facts—not administrative manipulation—law remains aligned with values of honesty and responsibility upheld by society.
Context of Indonesian Social Values
In Indonesian legal culture influenced by Pancasila values, the concept of justice is not merely legalistic, but also oriented towards social harmony. Taxation is understood as a manifestation of the fifth principle: social justice for all Indonesian people. The LPDP scholarship as an instrument for equitable education access also falls within this framework.
For this reason, public morality tends to reject any impression of “exploiting” state funds without reciprocal contribution. The challenge is ensuring that the legal system can distinguish between breach of scholarship contract obligations and legally valid tax status.
Conclusion: Legitimate Law is Law That Feels Just
Analysis using living law theory and sociological jurisprudence shows that the LPDP controversy is not merely a technical tax issue, but a matter of legal legitimacy in the eyes of society. Effective law is not only what is formally valid, but also what the public perceives as just.
PER-23/2025 has provided an objective framework in determining tax status for Indonesian citizens abroad. However, the success of this regulation depends greatly on how it is understood and accepted by society. Transparency, public education, and consistent enforcement are key to keeping law aligned with social morality.
Ultimately, law and morality need not be set against one another. Good law is law that can translate societal values into norms that are rational, certain, and fair. In the context of LPDP, that is both the challenge and the opportunity to strengthen public trust in the national legal and taxation system.