This article discusses the implementation of tax rules on debt-to-equity ratio in Indonesia. One of prolific profit shifting to minimize tax obligation performed by MNEs is through injecting huge amount of debt including debt from related parties as the equity. Therefore, the tax bases erosion exists due to excessive payment of interest calculated as deductible expenses against taxable income. This research occupies qualitative research, the data was collected through desk study and interview. The research shows that the implementation of this rule is a moving forward on Indonesia taxation system. However, it remainds task, such as the question whereas the ratio has been the reflection of business' equity structure. In addition, it needs to further scrutinize that each industries demand specific equity structure.
|Published - 2020