Petitioners’ legal counsel attending the Decision Pronouncement Hearing of the material judicial review of Law No. 7 of 1083 on Income Tax, Thursday (30/10) at the Plenary Courtroom. Photo by MKRI/Ifa.

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Jakarta (MKRI) – The Constitutional Court (MK) ruled inadmissible the petition in Case No. 170/PUU-XXIII/2025 challenging Law No. 7 of 1983 on Income Tax (PPh Law) as lastly amended by Law No. 7 of 2021 on the Harmonization of Tax Regulations (HPP Law) against the 1945 Constitution. According to the Court, the petitioners, who are two private employees named Rosul Siregar and Maksum Harahap, did not structure their petition consistently and inaccurately cited the laws they sought to challenge. Moreover, their petitum was unclear.

“Such inconsistency and error render the petition unclear or ambiguous as to which article or provision is precisely contested,” Justice Arsul Sani read out Decision No. 170/PUU-XXIII/2025 on Thursday, October 30, 2025.

Justice Arsul further explained that the petitioners submitted a petitum that was unusual for not offering alternative requests. For this reason, the lack of alternatives in the petitum violated the principles of legal clarity and certainty.

“Therefore, the petitioners’ request is unclear, ambiguous, or ‘obscuur’,” Justice Arsul concluded.

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Private Employees Object to Progressive Tax on Severance Pay and Pensions

Petitioners Seek Tax Exemption for Severance Pay and Pensions

They challenge Article 4 paragraph (1) of the Income Tax Law, which classifies all additional economic capacity—including severance pay and pensions—as taxable income, and Article 17 of the same law in conjunction with the HPP Law, which applies a progressive tax rate to such income. Petitioner I is set to retire this October, while Petitioner II will retire in a few years at a different company. They expressed concern that, under the challenged provisions, their pension funds—intended to support them after retirement—would be significantly reduced by the imposition of progressive tax deductions.

Article 4 paragraph (1) of the Income Tax Law reads: “The objects of taxation shall be income, namely any increase in economic capacity received or obtained by a Taxpayer, whether originating from within Indonesia or from outside Indonesia, which may be used for consumption or to increase the Taxpayer’s wealth, under any name and in any form, including: a. salaries, wages, commissions, bonuses, or gratuities, pensions, or other compensation for work performed; b. honoraria, lottery prizes, and awards; c. gross business profits; d. gains from the sale or transfer of assets, including gains obtained by companies, partnerships, and other entities from the transfer of assets to shareholders, partners, or members, as well as from liquidation; e. refunds of tax payments previously accounted for as expenses; f. interests; g. dividends, under any name and in any form, paid by companies, including dividend payments from insurance companies to policyholders, the distribution of cooperative surplus to management, and the return of cooperative surplus to members; h. royalties; i. rental income from assets; j. receipts or income from periodic payments.”

In their petitums, the Petitioners ask the Court to declare that Article 4 paragraph (1) and Article 17 of the Income Tax Law in conjunction with the HPP Law contrary to Article 28D paragraph (1), Article 28H paragraph (1), and Article 34 paragraph (2) of the 1945 Constitution; to rule that these provisions have no binding legal force insofar as they apply to severance pay, pensions, old-age benefits (THT), and employment termination benefits (JHT); to order the Government not to impose taxes on these forms of income for all Indonesian citizens—both government and private employees; and to instruct the legislature to adjust the taxation system to align with the 1945 Constitution.

Author: Mimi Kartika
Editor: N. Rosi
PR: Fauzan F.

Translator: Rizky Kurnia Chaesario/Yuanna Sisilia/Yuniar Widiastuti

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.

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