Does the New Regulation on Pre-Investigation Tax Audit Improve Certainty for Taxpayers?

In a situation involving a tax crime, the tax authority must carry out a pre-investigation audit before proceeding with an investigation. The purpose of this audit is to gather preliminary evidence to determine if a tax crime has indeed been committed. If the tax authority considers that it has enough preliminary evidence, it may escalate the process into a full investigation. On the other hand, if the tax authority determines that there is insufficient preliminary evidence, it will terminate the process.

In practice, many felt that the procedural rules regarding the pre-investigation audit for tax crimes were inadequate in providing taxpayers with certainty. Therefore, the Minister of Finance recently issued a new regulation on pre-investigation tax audit procedures, i.e., Minister of Finance Regulation No. 177/PMK.03/2022, which became effective on 3 February 2023 (“Regulation”).