Burden of Proof Trap? Watch Out for This Common Mistake in Tax Disputes!

In the fierce battles within the Tax Court, victory is often determined not by who has the longest argument, but by who can bear the burden of proof. This is where the classical legal maxim "Actor Incumbit Probatio" becomes the primary weapon. This principle establishes a fundamental rule: whoever asserts a claim is the one who must prove it.

However, in the Indonesian Tax Court, the application of this maxim has a unique dynamic as it works alongside the absolute authority of the Judge to seek material truth pursuant to Article 76 of the Tax Court Law.

The Responsibility of the Tax Authority (Appellee)

Often, the Tax Authority (the Appellee) makes fiscal corrections based on assumptions or conjectures, for instance, accusing a Taxpayer of unreasonable transfer pricing or deeming a transaction as a constructive dividend.

For example, in disputes regarding depreciation expenses or debts, if the Appellee asserts that an increase in debt is actually concealed income, they must prove it with concrete data, not just accounting logic without basis. If the Appellee fails to prove their allegation, the correction must be annulled by law.

The Obligation of the Taxpayer (Appellant)

On the other hand, the Taxpayer (Appellant) also bears the burden of proof when they assert their rights, such as claiming Input VAT or deductible expenses.

The Appellant must be able to demonstrate "Facts" (Facta) through cash flow documents, goods flow, and contracts to prove that the transaction truly exists and is valid. For instance, in a WHT Art. 23 dispute, if the Appellant asserts that services rendered by a third party are not subject to tax, they must prove that the services indeed do not meet the tax object criteria or that tax has been withheld according to regulations.

The Judge's Role: Arbiter of Material Truth

Although Actor Incumbit Probatio distributes the task of proof, Tax Court Judges possess a "veto right" through Article 76 of the Tax Court Law. Judges have the authority to determine who must prove what, in order to reach a judicial conviction (Article 78) regarding the actual truth of what occurred.

In transfer pricing disputes, for example, Judges often request an "Evidence Test" (Uji Bukti) where both parties disclose data before the judge. If the Appellee alleges a secondary adjustment in the form of a constructive dividend but fails to prove the scheme with valid comparability analysis, the Judge will overturn the correction as it is deemed mere assumption unsupported by facts (Facta sunt potentiora verbis).

Conclusion

Actor Incumbit Probatio serves as a shield for Taxpayers against arbitrary tax assessments and a reminder for the Tax Authority to always operate based on concrete evidence. In the Tax Court, assumptions have no place; only valid evidence and material truth will win the case.