Bakrie’s KPC Unit Loses Tax Motion

Jakarta Globe, Dion Bisara, February 10, 2010

The South Jakarta District Court on Monday threw out a pretrial motion by coal miner PT Kaltim Prima Coal aimed at stopping a tax evasion case against the Bakrie group unit.

The ruling means the Finance Ministry’s Directorate General of Taxation can continue a criminal investigation it is pursuing against KPC. The tax office is also probing two other Bakrie group coal miners for tax evasion.

It also further pushes the case into the political arena as the government and lawmakers battle over the state bailout of PT Bank Century.

On Monday, President Susilo Bambang Yudhoyono ordered the National Police to hunt down anyone suspected of tax evasion — seen as a warning to Bakrie group patriarch Aburizal Bakrie, whose Golkar Party is aggressively pushing the House of Representatives inquiry into Bank Century and claims that the Rp 6.7 trillion ($710 million) bailout was illegal.

A senior aide to the president has suggested the politicians pushing the probe into the bailout were the same ones allegedly guilty of tax evasion. There is growing speculation that a battle is looming between Yudhoyono and Aburizal, with the tax evasion cases and bailout investigation as their weapons.

Ihsanudin Nursi, an economist with the Indonesia Awakening Team, a vocal left-wing economic group, questioned the timing of the announcement on the tax investigation, which followed the formation of the House committee to investigate Bank Century.

“Let’s allow time for the legal proceedings to carry on, and see whether the government is serious about chasing tax dodgers or whether there is a political reason behind this,” he said.

Responding to the tax allegations on Tuesday, Aburizal was quoted on the Web site of TVOne, a Bakrie-affiliated media company, as saying, “I am not a tax dodger, because if it’s the companies [that were alleged to have evaded taxes], then they can have a different interpretation than the tax directorate general. So it must be resolved in court.”

The three Bakrie mining companies are being investigated for allegedly failing to pay a total of Rp 2 trillion in taxes for 2007. The other two firms are PT Bumi Resources and PT Arutmin Indonesia.

The companies have denied the allegations, saying they’ve met all their tax obligations for the year in question.

Judge Prasetyo Ibnu Asmara said the country’s Criminal Code didn’t recognize pretrial hearings in criminal investigations. A pretrial hearing can only be held to determine whether a court order to stop an investigation is lawful. An investigation itself is not subject to a pretrial proceeding.

“The request to stop the investigation is amiss,” Prasetyo said.

KPC’s lawyer, Aji Wijaya, said the company was considering appealing the ruling to the Supreme Court. He said the judicial system had become a tool of the “arbitrariness of the authorities.”

“The message we wanted in this filing is that the Directorate General of Taxation should proceed with the investigation ... but in such a manner that is consistent with procedures,” Aji said.

He said there was precedent for the motion, noting that the South Jakarta District Court in 2008 ordered the tax office to stop investigating plantation firm PT Asian Agri.