Don't Misstep! Understand the Judge's 'Absolute Power' in Assessing Tax Evidence

In the Indonesian tax justice system, the question of who must prove a disputed claim is often the deciding factor in victory. Unlike general civil courts which tend to rigidly adhere to the plaintiff's burden, the Tax Court has a unique characteristic where Judges possess absolute authority to determine the burden of proof. This is grounded in Article 76 of Law Number 14 of 2002 concerning the Tax Court.

Legal Basis: Article 76 of the Tax Court Law

Article 76 explicitly mandates Judges to determine what must be proved, who bears the burden of proof, and the assessment of such evidence,,. The elucidation of this article emphasizes that the primary objective of this authority is to seek material truth—the actual truth of what occurred, not merely formal truth on paper,.

Therefore, Judges are not limited to facts or evidence submitted by the Appellant (Taxpayer) or the Appellee (Tax Authority) in their appeal/lawsuit documents. Judges may explore new facts revealed during the hearing to ensure justice is served,,.

Application in Hearings: Case Studies

The application of Article 76 is evident in various tax disputes, ranging from transfer pricing issues to VAT input tax. Here are concrete examples of how Judges exercise this authority:

1. Transfer Pricing and Constructive Dividend Disputes In disputes where the Tax Authority deems service payments to affiliated parties unreasonable and re-characterizes them as constructive dividends, Judges use Article 76 to shift the burden of proof to the Tax Authority. Judges reason that if the Tax Authority alleges a constructive dividend (positive correction), they must prove that allegation with strong and competent evidence (the affirmantis est probare principle),,. If the Tax Authority relies solely on assumptions without valid comparability analysis, Judges will overturn the correction for the sake of material truth,.
2. Disputes on Existence of Goods/Services Conversely, in disputes regarding deductible expenses or input VAT, Judges often place the burden of proof on the Taxpayer. For instance, when a Taxpayer claims management service fees, Judges require the Taxpayer to prove the existence of such services through cash flow, goods flow, and supporting documents. If the Taxpayer fails to present convincing evidence (a minimum of 2 pieces of evidence as per Article 69), the Tax Authority's correction is upheld,,.
3. Material Truth Verification (Uji Bukti) Frequently, Judges order an "Evidence Test" (Uji Bukti) where both parties are asked to compare data before the Judge. In VAT cases involving goods flow disputes, Judges assess Invoices, Bills of Lading, and Payment Proofs to verify if the delivery of goods actually occurred. The Judge's final decision is based on the conviction built from the assessment of this evidence (Article 78),,.

Conclusion

Provisions of Articles 76 and 78 of the Tax Court Law affirm that proof in tax disputes is dynamic and oriented towards substance over form. Judges act not merely as passive referees, but as active actors excavating the truth. For Taxpayers and Tax Authorities, this means victory in court is determined not by who argues best, but by who can present facts and evidence closest to the material truth believed by the Judge.