Ruling hearing for the material judicial review of Law No. 7 of 2021 on the Harmonization of Taxation Regulations, Tuesday (1/16/2024). Photo by MKRI/Ifa.
JAKARTA (MKRI) — The Constitutional Court (MK) decided to reject the entire judicial review petition of Law No. 7 of 2021 on the Harmonization of Taxation Regulations (HPP Law) on Tuesday, January 16, 2024 at a ruling hearing in the plenary courtroom. The petition was filed by Leonardo Siahaan, a private employee.
“[The Court] adjudicated, rejects the Petitioner’s petition in its entirety,” said Chief Justice Suhartoyo delivering the verdict of Decision No. 67/PUU-XXI/2023.
The Petitioner challenged Article 4 paragraph (1) letter a of the HPP Law, which has been amended through Article 2 point 1 of the HPP Law, which regulates the reimbursement or compensation relating to work or services benefit in-kind and/or benefits. The a quo article reads, “The object of tax shall be income, which is any additional economic capacity received or obtained by the Taxpayer, whether originating from Indonesia or outside Indonesia, which can be used for consumption or to increase the wealth of the Taxpayer in question, in any name and form, including: a. reimbursement or compensation in connection with work or services received or obtained including salaries, wages, allowances, honoraria, commissions, bonuses, gratuities, pensions, or compensation in other forms including benefit in-kind and/or benefit, unless otherwise specified in this Law.”
In its considerations, delivered by Constitutional Justice Enny Nurbaningsih, the Court stated that the Petitioner’s request of the exemption of health facilities and medical treatment from taxable income has been regulated in Article 4 paragraph (3) letter d point 5 of the Income Tax Law, as is included in Article 3 point 1 of Law No. 7 of 2021. The exemption of taxable benefit in-kind and/or benefits is basically aimed at fairer and more targeted imposition of tax on reimbursement or compensation in the form of benefit in-kind and/or benefits.
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Justice Enny revealed that the Petitioner argued that taxing benefit in-kind is the Government’s effort to discipline companies that try to avoid taxes by providing benefits to their employees. This means that the such benefits can add to the company’s economic value. The Petitioner stressed that the Government should not view health facilities as benefit in-kind and/or other benefits as an addition to the company’s economic value, because any basis for imposing taxes on such kinds of health facilities cannot be justified and is unreasonable.
“With regard to the Petitioner’s argument, the Court believes the formation of Law No. 7 of 2021 was the Government’s effort to increase economic growth and accelerate economic recovery while still prioritizing the principles of justice and legal certainty. This change was also done as a form of optimization of state revenue that has an impact on the economy, welfare, and survival of the Indonesian people,” Justice Enny said.
She further explained that the main thing the Court was concerned about regarding the constitutionality of the a quo article is whether or not there was injustice or inequality arising as a result of the regulation of such benefits. The fact that such benefits are given to high-management-level employees but are not taxable so income tax cannot be imposed on them, while in fact these benefits can increase the recipients’ welfare, in casu employees at a high management level, has certainly caused legal uncertainty for ordinary workers who are not in the high management level. This in turn will lead to the violation of Article 28D paragraph (1) of the 1945 Constitution.
The Court asserted that justice does not always mean equal treatment for everyone, but also treating similar things equally while treating different things differently. Injustice would occur if different things are treated equally, in casu between employees in the high management level and ordinary employees.
Justice Enny further said that in relation to the aforementioned legal consideration and without any intention to judge the legality of the Regulation of the Finance Minister No. 66/2023, which further regulates Law No. 7 of 2021, it has been determined that benefit in-kind and/or other benefits of certain types and/or limits exempted from income tax are detailed as health facilities and medical treatment given by the employe as long as they are received by the employees for the reasons of work accidents, occupational diseases, life-saving emergencies, or further care and treatment as a result of work accidents and/or occupational diseases.
“This is also to respond that the Petitioner’s concern that health facilities and medical treatment costs provided by employers as taxable income is inaccurate since health facilities do not add to the economic value of tax subjects. This means that the Petitioner’s concern on the lack of exemption of taxable income’s objects has been answered. This includes his concern relating to the wish that employees or workers are not burdened with income tax on health facilities and medical treatment, which should be imposed on employers or business owners. As such, the Petitioner’s argument is legally groundless,” Justice Enny stressed.
Author : Utami Argawati
Editor : Nur R.
PR : Fitri Y.
Translator : Yuniar Widiastuti (NL)
Disclaimer: The original version of the news is in Indonesian. In case of any differences between the English and the Indonesian versions, the Indonesian version will prevail.
Tuesday, January 16, 2024 | 21:04 WIB 179