Trapped in Equalization Differences: How PT EI Won a Multi-Billion Revenue Dispute?

PT EI Tax Dispute: Positive Correction on Operating Revenue Based on VAT Base Equalization

The Directorate General of Taxes (DGT) performed a positive correction on Operating Revenue amounting to IDR 30,602,603,610 based on equalization techniques with the VAT Base (DPP) from January to December 2017. The tax authority argued that all deliveries listed in the VAT Returns constitute income that must be recognized in the current year, unless the Taxpayer can prove otherwise with valid source documents. PT EI contested this with the argument that the discrepancy resulted from double reporting of live cattle sales from 2016, which were only reported in the 2017 VAT Return due to administrative system constraints.

Judicial Considerations: Compliance Test and Document Synchronization in Equalization Disputes

The Board of Judges conducted an in-depth evidentiary hearing (compliance test) on sample invoices, delivery notes, and internal reconciliations. The Board opined that although discrepancies existed, the Petitioner successfully proved substantially that a portion of the transactions worth IDR 16,085,780,737 had been reported in the previous year; thus, re-taxing them in 2017 would cause double taxation. However, for the remaining balance not supported by adequate source documents, the Board upheld the Respondent's correction. This ruling emphasizes that in equalization disputes, the power of evidence through synchronization of goods and money flow is the key to refuting audit assumptions.

A Comprehensive Analysis and the Tax Court Decision on This Dispute Are Available Here