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Machfud Sidik as expert presented by the Government to give his statement in the follow-up hearing of material judicial review of the Land and Building Tax on Monday (26/3). Photo by Humas MK/Ganie.

Tax principles of Land and Building Tax (PBB) include the principle of benefit and ability to pay. This was conveyed by Machfud Sidik as expert presented by the Government in the judicial review hearing of Law No. 12/1985 on Land and Building Tax (PBB Law) on Monday (26/3). 

In his statement, Machfud said PBB is closer to the benefit principle, which means the public benefits from various facilities and conveniences existing in the country. "So [they] get benefits, for example just good road [system], better neighborhoods, and so on. That is one of the philosophies of the Land and Building Tax," said the 2000–2001 Director General of Taxes of the Ministry of Finance period. 

Machfud said that taxes is part of the state administration in various countries whose government recognizes the lower governments, the provincial or district and city governments; some of the types of tax referred to as taxing power, have been transferred to local governments, known as decentralization. 

"The process of decentralizing taxes and transfer to lower levels of government is an important element in fiscal reform, both in developed and developing countries, including Indonesia. Even Indonesia has carried out decentralization process known as the big bang drastic decentralization. [Part of the process] is providing local governments with greater authority to provide services to the community because, in general, the service is basically what the lower level governments, namely the district and city governments, undertake," he added. 

Therefore, Machfud added, in various countries including Indonesia, the regions are given the authority to levy taxes, one of which is the tax on the earth and buildings. Indigenous sources of income from various existing studies, which is a challenge that must be implemented by countries that embrace the decentralization system. "How the regions can get the space to provide services to the community. On the other hand, he was given space also to levy taxes, one of which is the Land and Building Tax," he said. 

Machfud explained that the causality between the provision of local public goods and the imposition of this tax has been proven by various theories and empirical proofs. One of them is by the tax system that should be interpreted as part of the socio-economic model and represents the social, political, and economic needs of society within a certain period. 

"This is done in various developed countries, including in the state of Indonesia. However, keep in mind that the concept of equality and expertise in taxation needs to be considered, as the heart of the tax system. The tax system has been pursued by various provisions, various theories in various countries. Including in Indonesia by adopting good tax criteria, taking equality into account," Machfud explained. 

The petition of case No. 3/PUU-XVI/2018 was filed by Jestin Justian, Ezra Prayoga Manihuruk, Agus The case No. 3/PUU-XVI/2018 was filed by Jestin Justian, Ezra Prayoga Manihuruk, Agus Prayogo, and Nur Hasan. At the preliminary hearing, the four Petitioners consisting of two university students, an employee, and a pensioner, explained their legal standing. Jestin Justian, a student admitted to losing the opportunity to purchase a piece of land for not being able to pay the Land and Building Tax (PBB). The reason is, as a student, he has not have income yet to pay the tax.

In line with Jestin, Ezra Prayoga Manihuruk, also a university student, said he paid for his tuition late because his parents had needed to pay for property tax (PBB) first so he got a fine from his university. Meanwhile, Agus Prayogo, an employee, explained that he suffered a loss due to a large amount of accumulation of house tax arrears because Nur Hasan could not pay property tax every year, which tends to increase, since he has retired and has no income.

The Petitioners elaborated that in Law 12/1985 the reason for having a right and obtaining benefits is used as the basis for taxation. This reasoning is very contrary to the phrase “to reside” that guarantees the right to own and obtain benefits of objects owned, as regulated in the 1945 Constitution. When purchasing a land and building, BPHTB (property transfer fees) is imposed on the person or entity, so according to the Petitioners, they shall no longer have the obligation to pay annual Land and Building Tax (PBB). (ARS/LA/Yuniar Widiastuti)

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