Tax Avoidance in the Form of Base Erosion and Profit Shifting in Digital Economic Transactions by Multinational Companies

Ricky Apriadi(1*), Lita Monalysa(2),

(1) Universitas Islam Negeri Raden Intan Lampung
(2) Sekolah Tinggi Ekonomi dan Bisnis Islam Lampung
(*) Corresponding Author


Google, recently has received some attention from the Indonesian government regarding tax avoidance. The attentions occur for major profit Google has gained through commercial, without tax contribution to Indonesia, is deemed to be unethical and unfair. Google as a company, receives income and utilizes public facilities in Indonesia, but shifts the income it earns in Indonesia into Singapore, so to speak it commits tax avoidance. The scheme of tax avoidance that Google has managed can also be termed as profit shifting. Profit shifting strategy itself may cause a decrease in tax earnings, hence becoming a threat for Indonesian base erosion. The main focus of this study is the tax avoidance scheme by Google, inhibiting factors of government policy against tax avoidance, and the government's strategy to face the tax avoidance. Data sources for this research are obtained from books, internet articles, and relevant constitutional regulations. The result from the study indicates Google has demonstrated tax avoidance in Indonesia by displacing its earnings to Singapore using the Double Irish Dutch Sandwich scheme. In addition, the Indonesian government faces several problems concerning its policy against tax avoidance, since Google does not own a permanent establishment in the country mentioned, accordingly it is difficult for the government to collect acquired tax payable that Google should have been compensated. The recommendation in this study for the government is to establish tax regulation dealing digital economy across jurisdictions or countries for multinational companies, or over the top.


Tax Avoidance; Base Erosion; Profit Shifting; Digital Economy.

Full Text:



Arifin, Zainal. (2013). Position Paper on BEPS for the G20 Finance and Central Bank Deputies Meeting, 15-16 December 2013. Canberra, Australia.

Brotodiharjo. (2008). Introduction to Tax Law. Bandung: PT Refita Aditama.

Creswell, JW (1994). Research Design: Qualitative and Quantitative Approaches. London: SAGE Publications Inc.

_____. (2013). Research Design: Qualitative, Quantitative, and Mixed Approach. Yogyakarta: Student Library.

Darussalam. (2013). Transfer Pricing: Ideas, Strategies, and Practical Guides in an International Tax Perspective. Jakarta: Danny Darussalam Tax Center.

Damian. (2013). Behind tax bribes. Jakarta: Danny Darussalam Tax Center.

Hartman, Amir. (2000). Net ready: Strategies for Success in the E-Conomy. America: McGraw-Hill Companies.

Love P. (2013). What is BEPS and how can you stop it? Paris: OECD Insights.

Mardiasmo. (2008). Revised edition of taxation. Yogyakarta: CV Andi Offset.

_________. (2011). 2011 revised edition of taxation. Yogyakarta: CV Andi Offset.

OECD. (2013). Addressing Base Erosion and Profit Shifting. Paris: OECD Publishing.

_____. (2013). OECD Action Plan On BEPS. Paris: OECD Publishing.

_____. (2014). Addressing the tax challenges of the digital economy, OECD/G20 Base Erosion and Profit Shifting Project. Paris: OECD Publishing.

Rahayu, Siti Kurnia. (2010). Indonesian Taxation: Concepts and Formal Aspects. Bandung: Graha Ilmu.

Soemitro. (2005). Taxation Principles and Basics. Bandung: PT Eresco.

Setiyaji, Gunawan and Amir, Hidayat. (2005). Evaluation of the Performance of the Indonesian Taxation System. Journal of Economics, University of Indonesia Esa Unggul. Jakarta.

Suandy, Erly. (2008). Tax Law Edition 4. Jakarta: Salemba Empat.

Hero and Richard, Burton. (2010). Tax law. Jakarta: Salemba Empat.

Waluyo. (2011). Indonesian Taxation. Jakarta: Salemba Empat.

Wells, B and Lowell, C. (2013). Tax Base Erosion: Reformation of Section 482's Arm Length Standard. America: The University Of Houston Law Center.

Wattimury, D. (2013). The Linkage: Convergence IFRS, BEPS Issue In G20 Summit and Indonesia Positioning, MoU Fiscal Policy Agency and University of Indonesia. Jakarta.

Zimmerman, Kenneth. (2000). Electronic Marketing: Integrating Electronic Resources into the Marketing Process. Orlando: Harcourt.

Republic of Indonesia. (2007). Law No.28 Year 2007. About General Provisions and Tax Procedures.

Republic of Indonesia. (2008). Law Number 36 Year 2008. About Income tax.

Republic of Indonesia. (2009). Law No. 16 of 2009. Provisions General and Tax Procedures.

________Regulation of the Directorate General of Taxes Number 32 of 2011 concerning Transfer Pricing.

________Regulation of the Minister of Finance Number 101/PMK.010/2016 Regarding Adjustment of the Amount of Non-Taxable Income.

Internet: Daily Cash, 2017, Google Agrees to Pay Taxes in Indonesia,, accessed on April 19, 2018

Nuntung Yusuf, 2017, Understanding Google's Tax Planning Structure, planning-pajak-google-8433, accessed on April 19, 2018

Iwan Supriyatna, 2016, Government Wants to Get Taxes from Google? Apply Google Tax like UK and India,, accessed on April 19, 2018

Triajie Wahyu El Haq, Here's the Contents of Google's Rejection Letter for Investigation,, accessed 20 april 2018

Hani Nur Fajrina, 2016, The British Way to Pursue Taxes from Google,, accessed on 20 April 2018

Tesa Oktiana, 2017, Google Pays Taxes in Indonesia,, accessed on 29 June 2018

Article Metrics

Abstract : 256 times
PDF : 145 times


  • There are currently no refbacks.

View My Stats