In carrying out its supervisory duties and functions, Directorate General of Taxes (DGT) uses an instrument known as Compliance Risk Management (CRM), which can map taxpayer compliance risks. The risks are mapped by comparing Tax Return data, which is self-assessed reported by the Taxpayer, to data received by the DGT from a third party. 

CRM assesses taxpayer compliance risks through the conformity of data and information obtained by the DGT and Taxpayer. If the data and information do not match, DGT may issue a Letter of Request for Explanation of the Data and/or Information (“Surat Permintaan Penjelasan atas Data dan/atau Keterangan” or SP2DK) to Taxpayer to obtain an explanation of the discrepancy. 

Some of the reasons for issuing SP2DK include unimplemented tax obligations, failure to meet tax obligations in accordance with the provisions, failure to equalize the data on income, costs, and withholding taxes; unreasonable value of income and asset growth presented in financial statement and/or Tax Return; and there is additional information (other data) that is not in accordance with the reported Tax Return. 

In general, the chances of Tax Office issuing SP2DK depend on the tax risks that exist in each taxpayer. The following is an example of each SP2DK issuance chance level: 

First, if the financial statements and the entire Tax Return reported by taxpayers are equal, the chance of issuing SP2DK is low. Equal data and information are obtained if the amount stated in the financial statements and amount of tax in one type of tax and other related types of taxes in Tax Return are matched. This provides evidence that Taxpayer has complied with the tax provisions. 

Second, if an unrecognized tax credit exists, the chance for the issuance of SP2DK may turn out to be moderate. Tax credit, as defined in Article 28 of the Income Tax Law, is a deduction from the Taxpayer’s tax payable for a Fiscal Year. Taxes paid in the current year, whether paid by the taxpayer or withheld by other parties, can be credited to tax payable at the end of the Fiscal Year concerned. 

Third, if concrete data related to transactions not reported in the Financial Statements or Tax Return is discovered, the chance of issuing SP2DK is high. SP2DK is a tool for requesting explanations from taxpayers for missing data and/or information. Reports that are not true, complete, and clear can provide an indication of non-compliance and open up chances that tax obligations have not been fulfilled. 

Fourth, SP2DK will have a very high chance of being issued if the reporting of VAT and Income Tax is not equal. The equalization of VAT and Income Tax is related to the comparison between amount of annual income in the Annual Tax Return and total amount of one year VAT objects in the Periodic VAT Tax Return. Equalization is used to ensure that all income has been collected VAT in accordance with tax provisions. If discrepancies are discovered, the Tax Office can issue SP2DK to obtain an explanation of the differences.