A New Paradigm for Judicial Scrutiny of Tax Discretion in Indonesia: Re-evaluating the 'Element of Justice' through the Substance Over Form Doctrine Following SEMA 02/2024

This study undertakes a comprehensive examination of the judicial review framework governing the discretionary authority of Indonesia's Director General of Taxes (DGT), as conferred by Article 36(1)(b) of the General Tax Provisions and Procedures Law (UU KUP), particularly in the wake of Supreme Court Circular No. 02 of 2024 (SEMA 02/2024). A central legal inquiry is addressed: does the issuance of SEMA 02/2024 insulate this discretionary power from judicial oversight, effectively rendering it an absolute authority? Employing a normative legal research methodology, this paper contends that the General Principles of Good Governance (AUPB) are an unsuitable standard for evaluating such discretion due to their inherent abstraction when applied to concrete tax disputes. In their place, this analysis posits that a foundational doctrine of tax law—substance over form—offers the most pertinent and effective test for the "element of justice" mandated by the statute. The core argument advanced is that Article 36(1)(b) does not grant unfettered discretion but rather a bound authority (gebonden discretie), intended to uphold material truth in circumstances where formal procedural avenues, such as time-barred objections, are no longer available. Consequently, SEMA 02/2024 does not abolish judicial review but fundamentally transforms it. The Tax Court's role shifts from adjudicating the substance of a tax assessment to scrutinizing the legality and reasonableness of the DGT's application of the substance over form principle in its decision-making process. This thesis is corroborated by empirical data from post-SEMA judicial rulings, which reveal continued and active judicial oversight concerning the legality of discretionary applications. The paper concludes with a recommendation for the DGT to formulate internal guidelines predicated on the substance over form principle to bolster legal certainty and administrative accountability.