In tax disputes, one of the critical elements in legal arguments is the burden of proof. The burden of proof refers to the obligation to provide sufficient evidence to support one’s claims or defenses. As the tax system in Indonesia is based on self-assessment, the burden of proof in tax disputes typically lies with the taxpayers. For taxpayers, the burden of proof becomes particularly relevant during disputes over tax audits or assessments. Taxpayers are expected to keep comprehensive and accurate records of their financial transactions, as this documentation will form the basis of any argument made during a tax dispute. The failure to meet the burden of proof can result in the dismissal of the taxpayer’s objection or appeal, leading to the tax assessment being upheld.
Shift in the Burden of Proof
While the initial burden of proof lies with the taxpayer, there are situations where the burden shifts to the tax authorities. When the tax office issues an assessment, it must be based on proper verification, valid information, and strong evidence.
According to Article 1, point 25 of the General Taxation Provisions and Procedures Law (KUP Law), a tax audit must be based on information and/or evidence, and it must be carried out objectively and professionally in accordance with an established audit standard. Article 12 par 3 of KUP Law, the DGT may only assess the tax liability if it has obtained valid evidence. Further, the elucidation of Article 29 of KUP Law emphasizes that the opinions and conclusions of the tax auditors must be based on strong evidence.
In the case of arbitrary or unclear assessments, the taxpayer can challenge the assessment and argue that the burden of proof has not been met by the tax authorities. For instance, if the taxpayer provides sufficient evidence to dispute an assessment, the burden may shift to the DGT to justify their position further. This is particularly relevant when the taxpayer has been able to demonstrate that the tax assessments were issued based on insufficient or incorrect data or evidence.
In the Indonesia Tax Court, the concept of shifting the burden of proof is often seen in practice, where the tax authorities must counter the evidence presented by the taxpayer to uphold their tax assessments. As one of the precedents, there is Tax Court Decision Number Put-60470/PP/M.VA/14/2015 which states that corrections based solely on analysis and assumptions, and not on evidence, are corrections that cannot be upheld. Consequently, the corrections were annulled by the Tax Court.
As a conclusion, the burden of proof plays a vital role in ensuring fairness and transparency in tax disputes, requiring both taxpayers and the tax authority to uphold their respective obligations. Successfully meeting the burden of proof can mean the difference between a resolved dispute and a costly tax liability.
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