The Anatomy of Proof in Tax Audit: Synergy of Audit Evidence, Competent Evidence, and Basis of Correction in the Era of Transparency

In the Indonesian tax system which adheres to the self-assessment principle, full trust is given to Taxpayers to calculate, pay, and report their own taxes. However, this trust is balanced by a supervision mechanism through tax audit. The core of a tax audit is proof. An audit is not merely about finding faults, but a process of testing compliance based on valid and relevant evidence.

Entering 2025, with the enactment of Minister of Finance Regulation Number 15 of 2025 (PMK 15/2025) and supporting regulations such as PER-18/PJ/2025 concerning Concrete Data and PMK 108 of 2025 concerning Access to Financial Information, the landscape of proof has undergone significant modernization. This article will thoroughly dissect three vital elements in an audit: Audit Evidence, Competent Evidence, and the Basis of Correction Proof.

1. Audit Evidence: The Raw Material of Examination

Based on the definition in the law, an audit is a series of activities to collect and process data, information, and/or evidence [SDSN UU KUP 2023, Article 1 number 25]. Audit evidence is all information used by the Tax Examiner to determine whether the audited information (Taxpayer's Tax Return/SPT) is in accordance with established criteria (Tax Laws).

Types of Audit Evidence:

In practice and regulation, audit evidence can be categorized into:

1. Physical Evidence & Documents: Covering books, records, and supporting documents such as invoices, contracts, bank statements, and transaction vouchers [PMK 15 Year 2025, Article 12]. The Tax Audit Blue Book emphasizes that tracing figures to physical documents (vouching) is a fundamental technique to test the existence of transactions [Blue Book, Chapter III].
2. Electronic Data: In the digital era, this is crucial. Examiners have the authority to access and download electronic data. Handling this data must follow digital forensic guidelines (imaging, hashing) to maintain data integrity so it can be legally accounted for [SE-36/PJ/2017; PMK 15 Year 2025, Article 7].
3. Taxpayer Statement: Oral or written explanations given by the Taxpayer during the audit, which are recorded in the Minutes of Information Gathering (BAPK) [PER-07/PJ/2017, Attachment C].
4. Third Party Information: Information from banks, suppliers, customers, or notaries. Access to banking data is now wider through the AKASIA mechanism and the latest financial information access regulations [PMK 108 Year 2025; SE-10/PJ/2017].

2. Competent Evidence: The Quality Standard of Proof

Not all evidence carries the same weight in the eyes of the law. For an audit finding (correction) to be defensible, it must be based on Competent Evidence.

Technically, PER-23/PJ/2013 concerning Audit Standards details "Competent Evidence" as evidence that meets two main elements:

A. Validity (Reliability)

Evidence validity is influenced by the source and method of acquisition:

1. Independence of Source: Evidence obtained from independent third parties (e.g., bank confirmations or Exchange of Information/EOI data) is considered more valid than evidence created by the Taxpayer themselves (internal) [SE-65/PJ/2013, Attachment II].
2. Condition of Acquisition: Evidence obtained directly by the examiner through physical inspection or field observation is more valid than mere oral statements.
3. Method of Acquisition: Evidence must be obtained legally. For example, sealing must be carried out according to procedures to maintain the integrity of the evidence [PMK 15 Year 2025, Article 14].

B. Relevance

Evidence must relate directly to the item being audited. For example, a bank statement is highly relevant for testing turnover (cash flow), but may be less relevant for directly testing fixed asset depreciation without supporting purchase invoices.

3. Basis of Correction Proof: From Data to Fiscal Findings

Tax Examiners use Audit Methods and Techniques to process Audit Evidence into Competent Evidence that underlies fiscal corrections.

A. Use of Concrete Data (PER-18/PJ/2025)

This is the most "instant" form of proof. Concrete data is data that does not require complex testing, such as:

• Tax Invoices approved by the DGT system but not reported.
• Withholding slips issued by counterparties but not credited/reported by the income recipient.
• Appeal/lawsuit decisions that are legally binding (inkrah) [PER-18 PJ 2025, Article 2]. Audit on this data is conducted with a Specific Audit mechanism which is very fast (10 working days for testing) [PMK 15 Year 2025, Article 6].

B. In-Depth Testing Techniques (SE-65/PJ/2013 & Blue Book)

For Comprehensive or Focused audits, examiners use techniques:

1. Equalization (Reconciliation): Matching balances from two different sources, e.g., turnover in Corporate Income Tax Return vs. VAT Tax Base, or Salary Expense vs. Article 21 Income Tax Object [Tax Equalization Material; SE-65/PJ/2013].
2. Cash/Goods Flow Test: If document evidence is incomplete, examiners use the cash flow or goods flow approach to calculate actual turnover. General formula: Beginning Balance + Receipts - Disbursements = Ending Balance [SE-65/PJ/2013, Attachment III].
3. Document Validity Test (Vouching): Ensuring transactions are recorded based on valid proof.

C. Affiliated Transaction Proof (Transfer Pricing)

For transactions with related parties, the basis of proof is more complex. Examiners will test the application of the Arm's Length Principle through:

• Comparability Analysis.
• Functional, Asset, and Risk Analysis (FAR Analysis).
• Determination of the most appropriate Transfer Pricing method [SE-50/PJ/2023].

4. Shifting Burden of Proof

A crucial point in PMK 15 of 2025 Article 13 concerns ex-officio determination.

If the Taxpayer fails to fulfill the obligation to lend books/records/documents within 1 month of the request, the Tax Examiner is authorized to calculate the tax due ex-officio. In this condition, the burden of proof shifts:

1. The Tax Examiner only needs to prove that the Taxpayer failed/insufficiently submitted the requested documents.
2. The basis of the examiner's correction is no longer the Taxpayer's real data, but comparative data, industry data, or other data possessed by the DGT.
3. The Taxpayer loses the opportunity to use their internal data as the primary rebuttal if that data is already deemed "not provided" due to exceeding the time limit [PMK 15 Year 2025, Article 12 paragraph 4].

Conclusion

In the Coretax era, data transparency is a necessity. Taxpayers must understand that neat and available Audit Evidence (audit readiness) is the best defense. Tax Examiners are required to be professional by only issuing corrections based on Competent Evidence (valid and relevant). The Taxpayer's failure to provide audit evidence not only weakens their bargaining position but also gives legal legitimacy to the tax authorities to determine tax ex-officio with a Basis of Proof that may be more detrimental to the Taxpayer.

List of Reference Source Documents:

1. SDSN UU KUP 2023 (Law on General Provisions and Tax Procedures).
2. PP Number 50 of 2022 concerning Procedures for the Exercise of Rights and Fulfillment of Tax Obligations.
3. PMK Number 15 of 2025 concerning Tax Examination.
4. PMK Number 108 of 2025 concerning Technical Guidelines on Access to Financial Information for Tax Purposes.
5. PER-18/PJ/2025 concerning Follow-up on Concrete Data.
6. PER-23/PJ/2013 concerning Audit Standards.
7. SE-65/PJ/2013 concerning Guidelines for Use of Audit Methods and Techniques.
8. SE-50/PJ/2023 concerning Technical Guidelines for Examination of Taxpayers with Special Relationships.
9. SE-36/PJ/2017 concerning Digital Forensic Guidelines for Tax Purposes.
10. Tax Audit Blue Book (Techniques, Methods, and Audit Programs).
11. Material "Tax Equalization Methods in Minimizing Reporting Errors".