Tax Disputes in Indonesia: Is an Expanded Role for Arbitration Necessary?

Oleh: Tian Hashfi Anwar, pegawai Direktorat Jenderal Pajak

Tax disputes are an inevitable issue in the world of taxation. This problem not only has financial implications but also reflects the dynamics between the government and citizens. Tax disputes have been a long-standing debate in the legal and economic spheres. The increasing complexity of tax regulations, differences in interpretation, and conflicts between tax authorities and taxpayers often lead to intricate disputes. One mechanism that may address these tax disputes is arbitration. Although arbitration has long been used in the context of business and international trade, its expanded role in tax dispute resolution remains a significant topic of discussion.

Before delving further into arbitration, it is essential to understand what tax disputes are. Law Number 14 of 2002 regarding Tax Courts defines tax disputes as conflicts in taxation between taxpayers or tax guarantors and authorized officials arising from decisions appealable to the Tax Court. In Indonesia, the resolution of tax disputes takes place through the Tax Court, and its decisions are considered final. If the disputing parties are dissatisfied with the Tax Court's decision, they can file a judicial review with the Supreme Court as an extraordinary legal remedy.

According to the Tax Court Secretariat website, more than 15 thousand tax dispute cases were resolved in 2022. This figure has been steadily increasing over the past 5 years. Resolving tax disputes through litigation processes often consumes significant time and costs for the involved parties, namely the tax authorities and taxpayers. Faced with this situation, it may be necessary to reconsider alternative approaches to resolving tax disputes.

Alternative Dispute Resolution

Alternative Dispute Resolution (ADR), commonly known as alternative conflict resolution, is the concept of collaboratively resolving disputes outside of the courtroom to reach an agreement. One form of ADR regulated by Law Number 30 of 1999 on Arbitration and Alternative Dispute Resolution (ADR Law) is arbitration. Currently, arbitration is used as an alternative method for civil dispute resolution in Indonesia. Unfortunately, the ADR Law does not cover the resolution of tax disputes in Indonesia, posing a challenge in providing alternative dispute resolution options in the field of taxation.

The exclusion of tax disputes in Law Number 30 of 1999 concerning Arbitration and Alternative Dispute Resolution (ADR Law) poses challenges in seeking alternative solutions in the field of taxation in Indonesia. Tax disputes often involve parties with different interests, such as taxpayers and tax authorities, and can become complex due to the legal and technical aspects involved. It is important to note that tax disputes have characteristics that differ from civil disputes in general. Therefore, having a specific legal framework to handle tax disputes can provide clarity and legal certainty for all parties involved. Some countries have adopted Alternative Dispute Resolution (ADR) systems for tax disputes as part of efforts to enhance efficiency and reduce the burden on the courts.

To address the limitations of the ADR Law, the government and relevant institutions should consider the enactment of additional laws or regulations specifically governing the practice of arbitration in cases of tax disputes. This approach is expected to provide a clear and comprehensive legal basis for the resolution of tax disputes outside the conventional court processes. Several countries, including Australia, have implemented Alternative Dispute Resolution (ADR) as an effort to resolve tax disputes. Currently, the Australian Taxation Office (ATO) has introduced mediation as an alternative means to settle tax disputes to reduce time and the number of tax disputes. Similar efforts have been made by other countries, such as the United States, Japan, South Korea, and Singapore, which have developed alternative dispute-resolution methods to alleviate the workload in courts (Harahab, 1997).

One of the main advantages of implementing ADR in tax dispute resolution is its ability to tailor the approach to the unique characteristics of each case. Consequently, the resolution can be more precise and fair, accommodating the needs and interests of each party. ADR also provides flexibility in procedures, which can result in faster solutions without compromising the quality of decisions. The significance of ADR in the tax context is not only in efficiency but also in maintaining positive relationships between tax authorities and taxpayers. By offering a more friendly and collaborative mechanism, ADR helps prevent larger conflicts and promotes voluntary compliance with tax regulations.

Although having potential benefits, the expansion of arbitration in tax disputes in Indonesia also faces several challenges. One of them is the complexity of tax regulations that may be difficult to unravel in the arbitration process. Additionally, disagreements regarding the interpretation of laws can be an obstacle to reaching fair decisions. By designing the right arbitration system, Indonesia can pave the way for more effective resolution of tax disputes, provide legal certainty, and promote a more stable business climate. This step can be a positive contribution to advancing the tax legal system and supporting the economic growth of the country.

*) Artikel ini merupakan pendapat pribadi penulis dan bukan cerminan sikap instansi tempat penulis bekerja.

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