Three non-governmental organisations are challenging the Tax Amnesty Law just twelve days after it was signed by President JokoWidodo. Yasayan Satu Keadilan (One Justice Foundation), Lembaga Bantuan Hukum Keadilan Jakarta Raya (the Greater Jakarta Legal Aid Justice) and Serikat Perjuangan Rakyat Indonesia (Indonesian Union for People’s Struggle) filed for a judicial review with the Constitutional Court on 13 July.
Chair of the One Justice Foundation Sugeng Teguh Santoso believes that the law legalises money laundering because Article 20 clause 1 of Law No. 28/2007 states that anyone who has assets outside the country is allowed to repatriate funds without any legal consequences.
The request for a judicial review is supported by the Prosperous Justice Party (PKS), a government opposition party. Ecky Awal Mucharam, a PKS delegate at the House of Representatives (DPR) has said that the tax amnesty law could potentially be misused for the purposes of corruption, drug trafficking and terrorism.
Article 20 states that tax amnesty informationretrieved cannot be used in a criminal investigation. The article even provides for a five-year prison sentence for leaking data, contrary to other laws, such as the Anti-Corruption Law, which encourage whistleblowing.
The tax aims to repatriate assets from taxpayers who have assets aboard. Taxes owed are written off and the taxpayers are released from any administrative or criminal sanctions.
To enjoy these facilities, taxpayers have to pay a fee. If they choose to repatriate assets, a flat fee of between 2 and 10 percent of the value of the repatriated assets will be applied, depending on the period in which they participate in the tax amnesty program. However, if they only choose to declare their assets, a flat fee between 4 and 10 percent will be applied.
A source in the Directorate General of Taxes said that Ecky’s move was the last stance by PKS against the tax amnesty. The party has been gathering opinion against the law since it was rolled out late last year.
In the DPR, PKS opposition has received support from the pro-government Indonesian Democratic Party for Struggle (PDI-P). The two party factions put up strong opposition the tax amnesty bill during passage through parliament. “PDI-P acted like an opposition (party), attacking the bill at any cost,” the source said.
At the eleventh hour prior to a plenary meeting about the bill June, of ten factions, PDI-P and PKSwere the only two to stand their ground against several articles in the bill, including the extension of the tax amnesty from the end of 2016 to the first quarter of 2017.
A Golkar Party politician believes that there was a political motive behind this move. The bill was ratified amid news of a cabinet reshuffle. Golkar’s U-turn in support of the government was allegedly carried out to increase the chances of a cabinet position for a Golkar politician, which could have reduced the number of PDI-P seats in the cabinet.
Meanwhile, despite having missed the chance to win executive seats, PKS this as a chance to increase its bargaining power in the selection process for Indonesian Chief of Police. PKS pledged its support for Commissioner General Budi Gunawan, but in the event, President Joko Widodo appointed Tito Karnavian to the position.
PKS has reached end game in its battle against the tax amnesty law, now that PDI-P has rolled back its opposition. The judicial review is the party’s final bet. It is also a major hurdle for the government.
That is why President Jokowi has taken the legal action seriously. The President has assigned the Minister of Finance BambangBrodjonegoro to represent the government in the Constitutional Court. There are many expectations to be upheld, from expansion of the taxpayer base, to increasing state revenue and boosting economic growth.