The Supreme Court has rejected an appeal filed by the Finance Ministry’s tax office against East Kalimantan based coal-mining company PT Kaltim Prima Coal (KPC) in a tax dispute trial.
A panel of three justices, namely Imam Soebechi, Supandi and Paulus E. Lotulung, decided to reject a case review filed by the Tax Directorate against KPC, the court wrote on its official website.
A case review is the final legal opportunity for petitioners to contest a ruling from a lower-level court, meaning that the government is now obliged to comply with the verdict.
The case first emerged when the directorate announced it had been investigating possible tax evasion at three mining companies, KPC, PT Bumi Resources and PT Arutmin Indonesia.
All three companies have ties with Aburizal Bakrie.
The alleged evasion reached Rp 2.1 trillion, the tax office said. KPC alone was suspected to have outstanding taxes of Rp 1.5 trillion (US$160.5 million).
In March 2009, KPC filed a complaint with the Jakarta tax tribunal after it received a letter from the tax office saying the company was under investigation. KPC said the investigation was not complying with procedures.
The tax tribunal ruled in favor of KPC and ordered the tax office to stop the investigation. The justices ruled that the tax office was no longer allowed to investigate the alleged tax withholding by KPC.
KPC also filed a pre-trial suit with the South Jakarta District Court to strengthen the tax tribunal ruling.
In response, the tax office filed a review in February this year with the Supreme Court, which ruled in favor of KPC.
Aji Wijaya, a lawyer for PT Bumi Resources, the mother company of KPC, said he welcomed the ruling.
“The Directorate General of Taxation needs to obey the ruling and halt the investigation against KPC,” he told Bloomberg.
Aji reiterated that KPC never withheld taxes. “If the tax office keeps probing, it will further distress taxpayers,” he said.
Tax office spokesman Iqbal Alamsjah refused to comment, saying the tax directorate had yet to receive the official copy of the verdict.
Following the Supreme Court ruling, legislators announced a plan to conduct a hearing with the Directorate General of Taxation.
“We need a clear explanation from the government. How come they lost in such a big taxation dispute?” Achsanul Qosasi, a member of the House of Representatives’ Commission XI on financial and banking, said.
KPC is a subsidiary of Bumi, a giant coal producer partly owned by Aburizal’s PT Bakrie and Brothers. About 80 percent of the company’s shares are publicly listed.
Aburizal is the chairman of the Golkar Party, the country’s second-largest political party. The party is a member of President Susilo Bambang Yudhoyono’s ruling coalition.
Golkar and the government experienced a rift during the investigation into the Bank Century bailout late last year. Both, however, have enjoyed friendlier terms of late after the establishment of a joint secretariat for the coalition party.
On Wednesday, Bumi shares rose 20 percent to Rp 2,050 as of 4 p.m. local time at market close, their biggest gain since April 2009.
New Finance Minister Agus Martowardojo last week promised further reforms in the tax office. He said collecting tax should not only mean chasing “tax evaders but also ensuring businesses can have a healthy investment climate” to boost trust in the government.
