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Corporate Tax Planning Under Scrutiny

Directorate General of Taxation will require tax planning transparency from corporations as part of a strategy to close tax avoidance loopholes in regulations.

Pajak

Taxpayers were submitting annual tax return form in East Tangerang Tax Office, Banten, on 27 March 2017. | ANTARA FOTO/Fajrin Raharjo

The Directorate General of Taxation is to require tax planning transparency for corporate taxpayers, to reduce the potential tax avoidance through reduction of income, but this plan is deemed ineffective in combating tax avoidance practices.

Director of International Taxation John Liberty Hutagaol said the stipulation, known as the mandatory disclosure rule (MDR), is part of base erosion and profit shifting (BEPS), which was arranged by the Organisation for Economic Co-operation and Development (OECD). BEPS is tax planning that utilizes gaps and weaknesses in tax regulations to hide or transfer profits in other countries at low tax rates. The ultimate goal is that companies do not have to pay taxes or only pay at low rates.

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