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HUNDREDS of gas agents complained about the imposition of income tax (PPh) and Value Added Tax (PPN) on transportation costs contained in the highest retail price (HET) for the distribution of 3kg LPG cylinders from Agents to Bases. The ranks of the Directorate General of Taxes imposed the tax only based on Service Note Number: ND-247/PJ/PJ.03/2021 issued on December 22, 2021.
This was stated by Cuaca Teger, a tax lawyer who advocates for the gas agents. In Service Note 247/2021, the Director General of Taxes considers the Transportation Costs obtained from the difference between the highest retail price and the retail selling price to be an additional economic capability as referred to in Article 4 paragraph (1) of Law Number 36 of 2008 concerning Income Tax and Law Number 42 of 2009 concerning Value Added Tax on Goods and Services and Sales Tax on Luxury Goods.
The Director General of Taxes’ assumption is considered wrong, because the transportation costs are sourced from the Regional Government Decree (beshickking). In fact, leasing must be sourced from legal acts (rule). The transportation cost of subsidized gas is determined and set by the Regional Government. Without a Regional Government Decree, 3 kg LPG Gas Agents cannot apply the Transportation Cost from gas buyers.
The Director General of Taxes’ action of taxing the transportation costs originating from the District Government Decree proves that the Director General of Taxes is taxing objects outside the law. “In theory it is known as no taxation without representation (no taxation without law) or taxation without representation is robbery (taxes without laws are robbery),” he said as reported in an official statement, Thursday (5/9).
In addition, the Agent also does not have the legal power to determine the amount of gas transportation costs because it is determined by the district government. This is different from gas sales transactions through sales and purchase agreements where the parties have the legal power to determine the value of the delivery of goods or services. For this kind of gas sales and purchases, PPh and PPN taxes can be imposed. However, for transportation costs, they should not be taxed.
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If transportation costs are taxed, the Taxation Law is subject to additional economic capacity originating from district/city government decisions which in fact are regional policies. Taxation of PPh and VAT should be imposed on additional economic capacity originating from legal acts at the statutory level. For example, the sale and purchase agreement as intended in Article 4 paragraph (1) of the Income Tax Law and VAT Law.
Several agents have explained to tax inspectors that the transportation costs are not subject to PPh and PPN. However, tax officers said that the Head Office of the Directorate General of Taxes has not revoked the Service Note Number: ND-247/PJ/PJ.03/2021 so that the taxation is still valid.
State Administrative Law Expert from Gadjah Mada University Oce Madril said that if tax collection is not based on the law, it is against the law and violates the Constitutional Court Decision Number 33/PUU-XXII/2024. The decision essentially confirms that “taxes and other levies for state needs are essentially the transfer of private property rights.” (private) to the country (public) which must be done according to law.
“The act of imposing taxes on the community without a clear legal basis (lex certa) and only based on legal interpretation, has the potential to cause unlawful acts and abuse of authority,” concluded Oce Madril. (Des)
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Table of Contents
Taxation of Transportation Costs in Indonesia: A Controversial Issue
The taxation of transportation costs in Indonesia has sparked controversy among gas agents, who are complaining about the imposition of income tax (PPh) and Value Added Tax (PPN) on transportation costs contained in the highest retail price (HET) for the distribution of 3kg LPG cylinders from Agents to Bases.
According to Cuaca Teger, a tax lawyer who advocates for the gas agents, the Director General of Taxes’ assumption that transportation costs are an additional economic capability subject to taxation is wrong. He argues that the transportation costs are sourced from the Regional Government Decree and should not be taxed. [[2]]
In Indonesia, the tax authority, Directorate General of Taxes, imposes taxes on various transactions, including services and goods. The tax rates vary depending on the type of transaction, with a withholding tax rate of 2% for most services and 15% for certain payments. [[1]]
However, in the case of transportation costs, the gas agents argue that they do not have the legal power to determine the amount of gas transportation costs, as it is determined by the district government. Moreover, the taxation of transportation costs originating from the District Government Decree is considered illegal, as it goes against the principle of “no taxation without representation” or “no taxation without law.” [[2]]
The controversy highlights the importance of ensuring that taxation is based on legal acts at the statutory level. As Oce Madril, a State Administrative Law Expert from Gadjah Mada University, notes, if tax collection is not based on the law, it is against the principles of taxation.
The issue also raises concerns about the impact of taxation on the economy. The Indonesian government has been working to increase tax revenues, with non-oil and gas income tax revenue reaching Rp636.56 trillion or 72.86% of the target in 2023. [[2]]However, the taxation of transportation costs could have unintended consequences, such as increasing the cost of goods and services for consumers.
In recent years, Indonesia has revised various taxation guidelines, including those related to upstream oil and gas taxation. [[3]]The revisions aim to clarify and simplify tax regulations, but the controversy over transportation costs highlights the need for further reforms to ensure that taxation is fair, transparent, and based on legal acts.
the taxation of transportation costs in Indonesia is a complex issue that requires careful consideration. The government must ensure that taxation is based on legal acts and does not unfairly burden businesses or consumers. By doing so, Indonesia can create a more conducive business environment and promote economic growth.
Keywords: taxation, transportation costs, PPh, PPN, Directorate General of Taxes, gas agents, Indonesia.
Meta description: Hundreds of gas agents in Indonesia are complaining about the imposition of income tax and Value Added Tax on transportation costs. Is this taxation legal? Learn more about the controversy and its implications for the economy.
Image description: Officers unload subsidized gas cylinders in Pati, Central Java. (Credit: MI/Agung Wibowo.)
Withholding tax Indonesia
Understanding PPh and VAT Determination on Transportation Costs in Indonesia
In Indonesia, the imposition of income tax (PPh) and Value Added Tax (PPN) on transportation costs has become a contentious issue, particularly among 3kg LPG gas agents. The Directorate General of Taxes has issued Service Note Number: ND-247/PJ/PJ.03/2021, which considers transportation costs obtained from the difference between the highest retail price and the retail selling price as an additional economic capability, subject to PPh and PPN taxation <a href="https://mediaindonesia.com/cdn-cgi/image/width=800,quality=80,format=webp/https://asset.mediaindonesia.com/news/2024/09/05/17255344462d3120c63c61dcc59bab.jpg”>[1].
However, tax experts argue that the Director General of Taxes’ assumption is incorrect, as transportation costs are sourced from the Regional Government Decree, not from legal acts <a href="https://mediaindonesia.com/cdn-cgi/image/width=800,quality=80,format=webp/https://asset.mediaindonesia.com/news/2024/09/05/17255344462d3120c63c61dcc59bab.jpg”>[1]. The transportation cost of subsidized gas is determined and set by the Regional Government, and without a Regional Government Decree, 3 kg LPG Gas Agents cannot apply the Transportation Cost from gas buyers.
The taxation of transportation costs originating from the District Government Decree raises concerns about taxation without representation, as the Director General of Taxes is taxing objects outside the law <a href="https://mediaindonesia.com/cdn-cgi/image/width=800,quality=80,format=webp/https://asset.mediaindonesia.com/news/2024/09/05/17255344462d3120c63c61dcc59bab.jpg”>[1]. This goes against the principle of “no taxation without representation” or “no taxation without law,” which is a fundamental concept in taxation.
In Indonesia, Article 23 income tax (PPh 23) is payable at a rate of either 15% or 2% of the income received by resident taxpayers [2]. PPh 21, on the other hand, is a withholding tax imposed on income received by domestic Individual Taxpayers (Wajib Pajak Orang Pribadi/WP OP) [3]. However, the taxation of transportation costs should be based on legal acts at the statutory level, such as sales and purchase agreements, and not on regional government decisions.
The taxation of transportation costs has significant implications for businesses, particularly gas agents, as it may lead to additional economic burdens. It is essential for taxpayers to understand their tax obligations and to consult with tax experts to ensure compliance with the law.
the determination of PPh and VAT on transportation costs in Indonesia is a complex issue that requires careful consideration of the legal framework and principles of taxation. Taxpayers should be aware of their rights and obligations, and the government should ensure that taxation is fair, transparent, and based on legal acts at the statutory level.
References:
<a href="https://mediaindonesia.com/cdn-cgi/image/width=800,quality=80,format=webp/https://asset.mediaindonesia.com/news/2024/09/05/17255344462d3120c63c61dcc59bab.jpg”>[1] Mediadnesia. (2024). 3 Kg LPG Gas Agents Complain About PPh and VAT Determination on Transportation Costs.
[2] PwC. (2024). Indonesian Pocket Tax Book 2024.
[3] Kami Workforce. (2024). Indonesia Payroll: PPh 21 Calculation.
Keywords: PPh, PPN, transportation costs, gas agents, Directorate General of Taxes, taxation without representation, Indonesia taxation law.
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