The Imposition of Tax Increase Sanctions in the KUP Law, What are they?

In general, there are 3 types of administrative sanctions in the field of taxation, namely fines, interest, and increases. In the previous article, administrative sanctions in the form of interest and fines have been described. In this article, we will discuss further the reasons for the imposition of administrative sanctions in the form of increases.

In the tax regime in Indonesia, administrative sanctions in the form of increases are understood as administrative penalties in the form of increasing the amount of tax that must be paid for violations of material provisions (Rahayu, 2006). An increased sanction is imposed so that taxpayers do not try to avoid paying taxes because it can cause losses to state income (Saidi, 2014).

However, the imposition of administrative sanctions in the field of taxation must meet the principle of proportionality (Pistone, 2019). That is, the amount of sanctions imposed is adjusted to the degree of error or violation committed by the taxpayer. Therefore, in general, the amount of tax sanctions differs depending on the violation committed.

The provisions regarding the increase in sanctions are regulated in Law no. 6 of 1983 concerning General Provisions and Tax Procedures stated in Law no. 11 of 2020 concerning Job Creation ( KUP Law ). Based on the KUP Law, there are at least 4 reasons that lead to the imposition of increased administrative sanctions.

First, the increase in sanctions due to the issuance of an underpaid tax assessment letter (SKPKB) based on Article 13 paragraph (1) letters b, c, and d of the KUP Law. The SKPKB is issued for 3 reasons, namely, the taxpayer does not submit the SPT according to the stipulated period and has been reprimanded in writing, and the results of the examination of PPN and PPnBM should not be compensated or are not subject to a 0% rate, and the bookkeeping and auditing obligations are not fulfilled.

For the three types of violations, taxpayers will be subject to increased sanctions as stipulated in Article 13 paragraph (3) of the KUP Law. These sanctions include an increase of 50% of income tax that is not underpaid in one tax year, 100% of income tax that is not or under-deducted, collected, or deposited, and an increase of 100% of VAT and PPnBM that is not or underpaid.

Second, an additional underpaid tax assessment letter (SKPKBT) was issued because new data were found, including data that had not been previously disclosed. Based on Article 15 paragraph (2) of the KUP Law, the issuance of the SKPKBT is subject to administrative sanctions in the form of an increase of 100% of the total tax deficiency.

However, the increased sanction is not imposed if the SKPKBT is issued based on a written statement from the taxpayer of his own free will. This applies as long as the Director-General of Taxes has not started to carry out audit actions in the context of issuing SKPKBT.

Third, examining the application for refund of tax overpayment from taxpayers with certain criteria that led to the issuance of SKPKB.

By Article 17C paragraph (5) of the KUP Law, the examination and issuance of the SKPKB are subject to administrative sanctions in the form of an increase of 100% of the total tax underpayment. In other words, the taxpayer must pay the tax deficiency plus an administrative sanction in the form of an increase of 100% of the total tax underpayment.

Fourth, researching requests for refund of tax overpayments from taxpayers who meet certain requirements and result in the issuance of SKPKB. Research that causes the issuance of SKPKB is subject to administrative sanctions in the form of an increase of 100% from the total tax deficiency.

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