What Are Tax Investigations?

Entering the new normal era, the Directorate General of Taxes (DGT) has resumed various activities that were previously restricted or suspended. However, these activities are implemented with certain adjustments to implement health protocols to prevent the spread of Covid-19.

Adjustments to the implementation of these activities are outlined in the Director General of Taxes Circular No. SE-34/PJ/2020. Referring to the appendix of the regulation, one of the adjustments is in the field of investigations. As such, what does a tax investigation refer to?

Definitions

In summary, an investigation is the continuous process of investigation that indicates preliminary evidence. Simply put, preliminary evidence refers to a situation, evidence or items that provide hints of a tax crime. See What is Preliminary Evidence.

Referring to Article 1 number ‘31’ of the General Provisions and Tax Procedures Law, a tax crime investigation refers to a series of activities conducted by an investigator to find and collect evidence.

The collection of evidence is intended to make a tax crime clear and find the suspect. A tax crime investigation is conducted pursuant to the provisions stipulated in the Code of Criminal Procedures Law.

Based on the definition, it can be concluded that the main purpose of an investigation is to find evidence as well as the suspect who has committed a tax crime.

Investigators’ Duties and Authority

Further, pursuant to Article 44 paragraph (1) of the General Provisions and Tax Procedures Law, tax crime investigations may only be conducted by certain Civil Servants within the DGT granted special authority as tax crime investigators.

When associated with the definition of an investigation, it can be concluded that the main task of an investigator is to find and collect evidence that can make a tax crime clear and in the end, the suspect can be found.

Referring to Article 44 paragraph (2) of the General Provisions and Tax Procedures Law, in carrying out their duties, investigators have 11 authorities. First, receiving, seeking, gathering and verifying information or reports pertaining to tax crime.

Second, verifying, seeking and gathering information on individuals or entities with respect to the correctness of actions committed in connection with tax crime. Third, requesting information and evidence from individuals or entities in connection with tax crime.

Fourth, conducting searches to obtain evidence in the form of bookkeeping, recording and other documents and other evidence that are allegedly connected to the tax crime and/or to confiscate such evidence.

Sixth, seeking the assistance of professionals in the context of conducting tax crime investigations. Seventh, preventing and/or prohibiting individuals from leaving a room or premise while an investigation is in progress and examining the identity of individuals, objects and/or confiscated documents.

Eighth, photographing any individuals in connection with tax crime. Ninth, summoning individuals to provide information and be examined as a suspect or witness. Tenth, terminating investigations. Eleventh, conducting other necessary activities to expedite tax crime investigations.

On the other hand, investigators must notify the commencement of an investigation and submit investigation results to the public prosecutor through official investigators of the State Police of the Republic of Indonesia pursuant to the provisions stipulated under the Code of Criminal Procedures Law.

Moreover, if necessary, investigators may seek assistance from other law enforcement officials to expedite the investigation process. In carrying out their duties, tax investigators must also comply with investigative norms and take legal principles into account.

Termination of Investigations

Pursuant to Article 44A of the General Provisions and Tax Procedures Law, investigations shall be terminated if there is insufficient evidence or the investigated event does not constitute a tax crime. The investigation may also be terminated if the event has expired or the suspect has passed away.

Further, referring to Article 44B paragraph (1), for state revenue purposes, upon a request from the Minister of Finance, the General Attorney may terminate a tax crime investigation within a maximum of 6  months from the date of the request letter for the termination of the investigation.

Pursuant to Article 6, Article 7 and Article 8 of the Minister of Finance Regulation Number 55/PMK.03/2016, a request letter for the termination of an investigation is prepared by the Minister of Finance if the Minister approves the request for termination of the investigation submitted by a taxpayer.

However, the Attorney General can only terminate an investigation insofar as the criminal case has not been transferred to the court. In addition, the investigation is only terminated after the taxpayer has settled tax liabilities that are unpaid/underpaid or which should not be otherwise refunded.

Taxpayers must also pay an administrative penalty in the form of a fine of 4 times the amount of tax that is paid/underpaid, or which should not be otherwise refunded. The elucidation of the termination of tax investigations for revenue purposes can be seen in MoF Reg. 55/2016.

Adjustments to Investigations

There have been adjustments in the field of investigations in the new normal era, among others, the submission of the notice of commencement of an investigation (Surat Pemberitahuan Dimulainya Penyidikan, hereinafter referred to as SPDP) in digital form to both the public prosecutor and the suspect.

However, a printed copy of the SPDP must also be sent by post and/or courier/forwarder services on the same day the SPDP is sent in digital form.

In addition, witnesses, experts or suspects may be examined via video conferencing. Further adjustments and provisions can be seen in the Director General of Taxes Circular No. SE-34/PJ/2020. (Bsi)