PGN And DGT Tax Conflict: Legal Ambiguities That Hinder Investment

JAKARTA - Executive Director of Pratama-Kreston Tax Research Institute, Prianto Budi Saptono, said that the tax dispute between PT Perusahaan Gas Negara Tbk (PGN) and the Directorate General of Taxes is one of the obstacles to investment in Indonesia.

"This tax law ambiguity has been going on for years without a complete solution," he said in a webinar Wednesday, January 13.

He noted that the 2017 World Economic Forum survey put tax regulations as the ninth factor hindering business at home.

"This dispute arose because of different interpretations of the status of natural gas as a tax object," he said.

As a result, the Tax Court judges granted PGN's request. Meanwhile, the Supreme Court panel of judges granted the PK application submitted by the Directorate General of Taxes.

Both PGN, the Directorate General of Taxes, and the Supreme Court refer to Article 4 paragraph (2) of the VAT Law and its explanations. This provision states that the types of goods that are not subject to VAT are certain goods including mining products or drilling products taken directly from the source.

"Well, this phrase taken directly from the source has generated multiple interpretations," said Prianto.

Based on the explanation of the article, there are two points of multi-interpretation, namely: phrases including natural gas such as LPG and phrases that are ready for direct consumption by the public.

PGN continued Prianto, also adhering to the confirmation letter from the State Owned Enterprises Tax Service Office (KPP BUMN) on August 19, 2009.

In the letter, as contained in the 2017 PGAS financial report, KPP BUMN confirmed to PGN that natural gas is a type of mining or drilling product taken directly from the source which is included in the group that is not subject to VAT.

"Meanwhile friends at the Directorate General of Taxes say that those who are not subject to VAT, for example when PGN buys from PHE (Pertamina Hulu Energi). But the goods that are already in PGN and in traders are taxable goods," he said.

Meanwhile, regarding the PK application submitted by the Directorate General of Taxes to the Supreme Court, according to Prianto, there are risks that arise during the judicial process.

"Meanwhile, at the MA level, the judges may not have sufficient knowledge of tax matters. But I do not know exactly what the conditions are because the trial is also closed," Prianto concluded.