Assessing the Necessity of GAAR In Indonesia: A Comparative Evaluation of Global GAAR Frameworks and the Development of an Effective Statutory Model to Mitigate Tax Avoidance

Abstract

This paper aims to identify the most appropriate General anti-avoidance rule (GAAR) to be adopted by Indonesia. It looks into the Indonesian legal framework, compares the GAARs in other countries, and discusses various jurisprudential decisions to measure the effectiveness of the GAARs of other jurisdictions. In doing so, this paper simultaneously contributes to academic literature and Indonesian taxation policy by offering technical recommendations to Indonesia’s government to promote and support the fairness and integrity of its tax system and discourage the abuse of avoidance measures by its taxpayers. After a thorough review of Indonesia’s tax laws and rules, it is shown that the current specific anti-avoidance rules (SAARs) and the limited application of the substance-over-form principle are inadequate in addressing the rampant use of tax avoidance practices of Indonesian taxpayers. To bridge this gap, a statutory GAAR primarily applicable to corporate taxpayers is proposed. The proposal adopts the pre-determination of whether a scheme falls within the purview of GAAR, a lower GAAR threshold for transactions involving corporate taxpayers, and the institution of an independent GAAR panel.