Following a IDR2.1trillion (USD226m) tax arrears claim on Bakrie Group in January, the Indonesian Directorate General of Taxes (DGT) warns that it will commence a program of transfer pricing audits on selected groups.
The Indonesian Directorate General of Taxes (DGT) says that without supervising the transfer pricing practices of multinational companies in Indonesia, the country would lose trillions of rupiah, an injustice to the regular taxpayer.
The DGT has taken note of a number of larger companies whose earnings grow while their tax contributions diminish. On deciding whether to audit a group's transfer pricing practices, the DGT considers whether the group exports significant volumes or makes large fee payments to affiliated companies established in countries with a lower income tax rate than in Indonesia.
Bakrie & Brothers is a composite group involved in coal, agribusiness, oil and gas, telecommunications, metals and infrastructure. Its tax arrears settlement of IDR2.1trillion includes a fine of four times actual tax arrears. The alleged tax arrears related to three mining companies in the group, namely PT Bumi Resources Tbk, amounting to IDR376bn, PT Kaltim Prima Coal (KPC), IDR1.5trillion, and PT Arutmin Indonesia, IDR300bn.
The Indonesian Directorate General of Taxes said it had begun in 2001 to mobilize a team of 1,000 employees specializing in transfer pricing problems and 15 experts were sent abroad to gather intelligence.
This comprehensive report in our Intelligence Report series examines the global and national landscapes in which companies can use transfer pricing to improve their after-tax returns, including summaries of recent developments in design of the corporate supply train, the usefulness of 'offshore' in international corporate tax planning, and a section covering the spread of DTAAs and CFC laws. It is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report16.asp
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