MUI Fatwa: Land and Buildings as well as Primary Needs Should Not Be Subject to Repeated Taxation

JAKARTA. The Indonesian Ulema Council (MUI) has stated that Indonesia’s tax regulations must uphold the principle of justice. To that end, MUI has issued five fatwas regarding the imposition of tax in Indonesia.

One of them is that MUI decrees that non-commercial land and buildings must not be subjected to repeated taxation. In addition, MUI also decrees that primary necessities of the people must not be subjected to repeated taxation.

In its statement, the Chair of the Fatwa Commission of the MUI’s 11th National Conference Steering Committee, Prof. KH Asrorun Ni'am Sholeh, said that one of the reasons for issuing the fatwa is the injustice caused by the imposition of the Land and Building Tax (L&B tax).

In detail, the five fatwas issued by MUI are as follows:

1. The state is obliged and responsible for managing and utilizing all state assets for the greatest prosperity of the people.

2. If state assets are insufficient to finance the needs of the state in achieving public welfare, the state may collect taxes from the people under the following conditions:

a. Income tax may only be imposed on citizens who have sufficient financial capacity, which, according to Islamic la,w must be at least equivalent to the nisab of zakat mal, namely 85 grams of gold.

b. Tax objects may only be imposed on assets that have the potential to be made productive and/or constitute secondary and tertiary needs (hajiyat and tahsiniyat).

c. Taxes must be used for the benefit of people in need and for the broad public interest.

d. The imposition of taxes must be based on the principle of justice.

e. Tax administration must be trustworthy and transparent, and oriented toward public welfare (maslahah ‘ammah).

3. Taxes paid by taxpayers, from a sharia perspective, are considered the property of the people, and their management is entrusted to the government (ulil amri). Therefore, the government is obliged to manage tax revenues based on the principle of trustworthiness, namely honesty, professionalism, transparency, accountability, and fairness.

4. Goods that constitute primary needs for the public (dharuriyat) must not be subjected to repeated taxation (double tax).

5. Consumptive goods that are primary needs, especially basic staples (sembako), must not be taxed.

6. Land and buildings used for residential (non-commercial) purposes must not be subjected to repeated taxation.

7. Citizens are obligated to comply with tax regulations established according to the provisions referred to in points 2 and 3.

8. The collection of taxes that does not comply with the provisions referred to in points 2 and 3 is deemed unlawful (haram).

9. Zakat already paid by Muslims shall reduce their tax obligations, as regulated in points 2 and 3 (zakat as a tax deduction).

Response from DGT

Meanwhile, Director General of Taxes Bimo Wijayanto stated that the fatwas issued by MUI are consistent with the current tax provisions.

For instance, the government has long imposed thresholds for goods subject to VAT and has provided income tax exemptions for MSMEs.

Therefore, as quoted from Bisnis.com, he believes the fatwa will not trigger public controversy. Nevertheless, Bimo considers it necessary for the DGT to provide further clarification to MUI regarding the matter. (ASP/KEN)