Tax Office awaits SC’s decision on oil, gas tax dispute

The Directorate General of Taxation is waiting for an advice from the Supreme Court related to the reimbursement of about Rp 400 billion in value added tax (VAT) payment to about 30 oil and gas production sharing contractors (PSC), Kompas reported on Thursday.

Director General of Taxation, Hadi Purnomo told the daily on Wednesday that his office had asked for an advice from the Supreme Court after it lost in a legal fight with the country’s oil and gas contractors in the tax court.

“The legal process has not been finalized and we are waiting for the Supreme Court’s decision,” he said. He also denied that the reimbursement would reach a total of Rp 2 trillion. “I think it is about Rp 400 billion,” he said.

The dispute occurred due to the difference interpretation between the tax office and oil and gas contractors on a clausal in the Value Added Tax Law No. 11, 1989 which regulated the postponement of the VAT payment of oil and gas contractors.

According to the Director General of Taxation, the oil and gas contractors were deferred from paying VAT only until December 31, 1999 and after this period, this facility was no longer valid. The oil and gas contractors, however, said that the facility is still valid. With this belief, about 30 oil and gas contractors brought the case to the tax dispute settlement agency (BPSP), a court that is especially in charge of handling tax disputes. The court later issued a decision in favor the oil and gas contractors.

Hadi admitted that besides the obligation to pay the claim made by the 30 oil and gas contractors, his office were also required to reimburse the VAT and sales tax on luxury goods paid by about 40 oil and gas contractors. The latter tax reimbursement is based on the Finance Minister’s recent decree which requires the tax office through BP Migas, the government’s agency in charge of oil and gas, to return the VAT and sales tax on luxury goods payment to oil and gas contractors.

The reimbursement which reaches about Rp 1 trillion would be returned to the oil and gas companies based on their production split ratio. The oil and gas companies generally receive 15 percent from oil production and about 35 percent from gas production under the existing production sharing contracts. (*)