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The Directorate of General Taxes (DGT) has recently released its 2023 Annual Report, providing a clear account of its operations and accountability. The report highlights that during 2023, the DGT took preventive measures against tax bearers to collect tax debts totaling up to IDR 1.5 trillion. Compared to the previous year, there was a 24.3% decrease in the number of taxpayers restricted from traveling abroad, with 436 taxpayers prevented from international travel by the Ministry of Law and Human Rights.
Prevention is one of the strategies employed by tax authorities to ensure tax bearers fulfill their obligations. The requirements and procedures for prevention are detailed in the Law of the Republic of Indonesia Number 19 of 1997 regarding Tax Collection by Distress Warrant, as amended by Law of the Republic of Indonesia Number 19 of 2000. This article will explore the procedures and methods of tax collection to help taxpayers avoid receiving a distress warrant.
Distress Warrant
According to the Law of the Republic of Indonesia (UU) Number 19 of 1997 jo Number 19 of 2000, a distress warrant is a legal document that orders the payment of tax debts and associated collection costs. It carries the same legal force as a court decision with permanent legal effect, meaning it can be executed directly without a court order and cannot be appealed.
A distress warrant is issued under specific conditions. First, the tax bearer fails to pay off the tax debt and has been issued a warning letter or a similar notice. Second, the tax bearer has received an immediate and total tax collection instruction letter (Surat Perintah Penagihan Seketika dan Sekaligus / SPPSS). Third, the tax bearer does not comply with the terms of a tax installment or deferment decision.
Typically, a distress warrant is issued after the authorized official sends a warning letter or similar notice. However, in the case of SPPSS, a distress warrant can be issued before or after such a warning. The "similar notice" is a letter that serves as a warning in tax collection efforts before a distress warrant is issued.
A valid distress warrant must include at least four elements. First, the name of the taxpayer, or both the taxpayer and the tax bearer. Second, the basis for tax collection. Third, the amount of tax debt. Fourth, the instruction to pay.
If any of these elements are missing, the taxpayer can challenge the distress warrant in tax court. Despite its executory power, a distress warrant cannot lead to confiscation if it is delivered less than forty-eight hours in advance. This provision gives the tax bearer an opportunity to settle the tax debt specified in the distress warrant.
Confiscation
If the tax bearer fails to pay the debt within forty-eight hours, the DGT Official can issue an instruction letter to proceed with confiscation. The UU 19/1997 jo UU 19/2020 stipulates that confiscation is carried out by a tax bailiff witnessed by at least two adult Indonesian residents, known to the tax bailiff, and trustworthy. After the confiscation, the tax bailiff prepares a Minutes of Confiscation, which is then signed by the tax bailiff, the tax bearer, and the witnesses.
Confiscation targets movable and immovable properties belonging to the tax bearer, which can be located at their residence, place of business, domicile, or elsewhere. However, there are six items exempt from confiscation, as outlined in the UU 19/1997 jo UU 19/2000:
• clothing, bedding, and related equipment used by the tax bearer and their dependent family.
• a one-month supply of food and drink, along with cooking utensils at home.
• equipment related to government service obtained from the state.
• books related to the position or work of the tax bearer, and tools used for education, culture, and science.
• equipment in good condition still used for daily work or business, up to a total amount of Rp20,000,000.00 (twenty million rupiah).
• disabled equipment used by the tax bearer and their dependent family.
In cases where the tax bearer's properties have been confiscated by the public prosecutor or the police as evidence in a criminal case, the tax bailiff will submit a distress warrant accompanied by a notification letter. This letter states that the properties will be confiscated once the evidence process is completed and it is decided that the evidence will be returned to the tax bearer. The public prosecutor or the police will then immediately notify the official who issued the distress warrant to carry out the confiscation before the properties are returned to the tax bearer.
It is important to note that properties confiscated by the District Court or other authorized agencies cannot be confiscated for tax collection purposes. In such cases, the tax bailiff submits a distress warrant to the District Court or other authorized agency. During the next hearing, the court determines the confiscated properties as collateral for repayment of the tax debt and decides on the distribution of proceeds from the sale of the properties based on the State's priority rights for tax collection.
Although the priority right for tax collection supersedes all other priority rights, there are exceptions. First, legal costs solely caused by a judgment to auction movable and/or immovable property. Second, costs incurred to save the properties in question. Third, legal costs solely due to the auction and settlement of an inheritance.
Prevention
The UU 19/1997 jo UU 19/2000 defines prevention as a temporary prohibition against certain tax bearers from leaving the territory of the Republic of Indonesia for specific reasons. Prevention can only be applied to tax bearers with a minimum tax debt of Rp100,000,000.00 (one hundred million rupiah) and whose good faith in paying off their tax debt is in doubt.
The maximum prevention period is six months, with the possibility of extension for another six months. Prevention can also be implemented against several people, including corporate taxpayers or heirs.
It is crucial to understand that prevention does not result in the elimination of tax debts or the cessation of tax collection. According to tax provisions, tax debts are written off only when they have been paid in full or have expired. Therefore, even if preventive measures are taken against the tax bearer, tax collection actions continue.
Detention
Detention is the temporary restriction of the tax bearer's freedom by placing them in a certain place. Detention can only be applied to tax bearers with tax debts of at least Rp100,000,000.00 (one hundred million rupiah) and whose good faith in paying off tax debts is doubtful.
The maximum detention period is six months, with the possibility of an extension for another six months. However, detention may not be carried out when the tax bearer is praying, attending an official session, or participating in the General Election.
This article provides a general overview of the tax collection process by distress warrant. In the next article, we will delve into the details of the tax collection process, offering insights to help taxpayers navigate these complex procedures and avoid potential legal consequences.
