DOES THE RECENTLY IMPLEMENTED REGULATION ON COUNTRY-BY-COUNTRY REPORTING DETER TAX AVOIDANCE?

Nala Kurniawan, Anggari Dwi Saputra

Abstract


Abstract

To adhere with Base Erosion and Profit Shifting (BEPS) Action 13, Indonesia enacted regulations concerning Transfer Pricing Documentation and Country-by-Country Reporting (CbCR) to address the issue of tax avoidance. Those regulations introduced the requirement of CbCR in Indonesia, where Multinational Enterprises (MNEs) operating in Indonesia are required to provide tax authorities with geographic breakdown of their profitability, tax payments, and activities wherever they operate. Using the newly implemented CbCR in Indonesia as a treatment for private disclosure requirement, this study examines the effect of CbCR on MNEs tax avoidance. Employing EUR 750 million consolidated revenue threshold for disclosure and utilizing regression discontinuity design as well as difference-in-differences analysis, we document a 4-8 percentage point increase in effective tax rates among affected MNEs, thus reflecting a decrease in tax avoidance in treatment firms. Our findings contribute (i) to the recent empirical literature on how CbCR as a private disclosure affects corporate tax avoidance behavior and (ii) to the policy evaluation whether CbCR regulation has achieved its objective.


Abstrak 

Untuk memenuhi Base Erosion and Profit Shifting (BEPS) Aksi 13, Indonesia menerbitkan peraturan mengenai Dokumentasi Penentuan Harga Transfer dan mengenai Laporan per Negara (CbCR). Peraturan-peraturan tersebut memperkenalkan kewajiban pelaporan CbCR di Indonesia, di mana perusahaan multinasional yang beroperasi di Indonesia diwajibkan untuk memberikan rincian geografis mengenai profitabilitas, pembayaran pajak, dan aktivitas mereka di manapun mereka beroperasi kepada otoritas pajak. Dengan menggunakan CbCR yang baru diimplementasikan di Indonesia sebagai bentuk perlakuan bagi persyaratan pengungkapan privat, penelitian ini menguji pengaruh CbCR pada penghindaran pajak Perusahaan Multinasional (MNE). Dengan menggunakan batasan peredaran bruto konsolidasi sebesar EUR 750 juta untuk pengungkapan dan analisis regression discontinuity design serta difference-in-differences, kami membuktikan adanya peningkatan sebesar 4-8 persen dalam tarif pajak efektif di antara MNE yang terdampak kewajiban CbCR, yang menggambarkan penurunan penghindaran pajak pada perusahaan yang memperoleh perlakuan. Temuan kami berkontribusi (i) pada literatur empiris terbaru tentang bagaimana CbCR sebagai pengungkapan privat memengaruhi perilaku penghindaran pajak perusahaan dan (ii) pada evaluasi kebijakan apakah peraturan CbCR telah mencapai tujuannya.


Keywords


Transfer Pricing; Country-by-Country Reporting; private disclosure; corporate taxation; tax avoidance; Transfer Pricing; Laporan per Negara; pengungkapan privat; pajak perusahaan; penghindaran pajak

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References


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