ESSAY

TAX AVOIDANCE AND EVASION

This essay was prepared to fulfill the assignment for the English Practicum Course

Lecturer

Eiffeliena Nur’aini Fisikaningputri Purwienanti, S.E., Akt., M.M., M.Fin.An.

Arranged by

Name : Dwi Hidayati

Nim : 40011422650042

Class :B

D4 TAX ACCOUNTING DEPARTMENT

VOCATIONAL SCHOOL FACULTY

DIPONEGORO UNIVERSITY

2023
 One of the state assets that comes from the people, by the people, and back to the people
is the term tax. Taxes are paid to the government by way of taxpayers reporting Annual Tax
Returns through the Directorate General of Taxes. Taxes function to prosper and protect the
community which is needed as the main supporting budget in providing facilities or
development. However, many Indonesian people do not comply with this, such as competing to
do tax avoidance and tax evasion in order to be able to use or enjoy fixed assets, intangible
assets, non-current assets, and other assets that taxpayers have. Many people cannot understand
the difference between tax evasion and tax evasion. Taxpayer intend to do tax evoidance, but it
ends in tax evasion where this is done illegally.

Tax avoidance can be defined as an effort to avoid taxes carried out by taxpayers where
this is done legally but is still categorized in a safe position because it does not conflict with
applicable rules and is carried out by exploiting the weaknesses listed in the Law and Tax
General Provisions, but this was not approved by the government. According to the knowledge
that I studied, people often do tax avoidance in 3 ways, the first is refrain, where the taxpayer
does not do something that can be taxed. Example: Changing the belt material, which was
originally made of genuine animal skin (snake, crocodile) was replaced with plastic. The second
is moving locations, meaning that taxpayers move places to avoid high tax rates to low tax rates.
Example: A taxpayer owns a business in the middle of town and it turns out that taxes there are
high, so the taxpayer moves to a lower location. And finally, juridical tax evasion is carried out
by exploiting the void or ambiguity of the law. Tax evoidance is very different from tax evasion.
Tax evasion is more illegal and is categorized as unsafe because the actions taken have violated
the applicable tax regulations. Just as a tax payer's parents give gifts to their children with the
aim of preventing the payment of taxes on heritage assets. This can be seen as a synthetic method
of controlling one's affairs within the law, thereby reducing the responsibility for paying taxes
which can be said to be both legal and immoral.

Implicitly, tax evasion is also included in the category of fraud. Because it is done
intentionally in reporting false information on federal income tax returns. So, is tax evoidance
also categorized as fraud? Tax evoidance is not categorized as tax fraud because it is a legal
method that is carried out by means of withholding, tax credits, and income adjustments to
reduce tax liability. In this modern era, not a few people commit tax fraud. Tax fraud is very
agile in carrying out its tactics. A common method used is refund fraud which involves stealing
identities and drawback fake income tax returns in an attempt to obtain refunds for illegally
received taxes. Fraud in inaccurate reporting of the number of workers by collecting payroll
taxes is also a method of tax fraud. Apart from that, it can also be done by the intentional error
method in paying Income Tax. If the taxpayer makes a deliberate mistake, it will be written off
as negligence. However, if this action is found to have been committed intentionally, it will
result in serious consequences such as imprisonment. Not only taxpayers who can commit tax
fraud, many other people also cheat by pretending to be tax officers. The fraudster calls and
threatens the taxpayer to make tax deductions directly from the bank account. The rise of tax
fraud needs to be explored by the implications that underlie someone committing this tax fraud.
The biggest possibility is that taxpayers object to taxes imposed due to financial distress and
capital loss or reduced income received for their business so that they are motivated to commit
tax fraud.

One example of a tax fraud case that is being hotly discussed was raised from the case of
Rafael Alun Trisambodo, who was being investigated by the Corruption Eradication
Commission due to having improper wealth. The former DGT Echelon III employee has a
wealth of Rp. 56.1 billion. The Minister of Finance Sri Mulyani has removed Rafael from his
position and duties at the DGT for violating Article 31 paragraph 1 PP 94 of 2021 concerning
Discipline for Civil Servants. As preliminary evidence, the investigative team found a flow of
gratuity money received by RAT amounting to around US$90,000 which was received through
PT Artha Mega Ekadhana (AME). PT AME often handles large corporate clients whose taxes
are tens to hundreds of billions. The method used by Rafael to commit tax evasion is done by
reducing state finance income by minimizing the nominal tax. Indirectly, Rafael entered into a
non-disclosure agreement. For example: PT Sukses Makmur has taxes to pay of 100 billion, but
the PT does not want to pay that much tax to the Director General of Taxes (DGT). Then Rafael
and his community recommended his tax consulting company, PT AME, to help reduce the tax
amount by illegal means. Those who initially paid 100 billion in taxes became only 10 billion.
Apart from that, Rafael also helped pass PT Sukses Makmur from an internal tax perspective.
For the services that have been done by Rafael, because he has saved 90 billion in taxes. Rafael
paid 5 billion for the consulting services. From this case, Rafael does not eat people's taxes, but
eats money that could actually become state taxes or more precisely tax evasion. All assets
related to Rafael's tax evasion have been confiscated by the Corruption Eradication Commission
and are subject to a maximum prison sentence of 20 years.

The importance of taxes is not only to run the wheels of government which consists of
state officials, but to be able to provide welfare through infrastructure development, subsidies,
health services, and education aimed at the people. What's wrong if we comply with tax
provision in a timely manner without committing tax evoidance and evasion. Someone who does
this will harm himself by being subject to sanctions according to applicable law. To minimize the
occurrence of tax avoidance and evasion which can be detrimental to state revenues, the public
needs to be given socialization so that they have high awareness of the importance of taxes, carry
out tax audits to investigate and supervise each taxpayer, and immediately report suspicions if
there is a taxpayer who commits tax evasion.

 Notes Tax Accounting Terms In English:

- State assets - Tax General Provisions
- Annual Tax Returns - Heritage assets
- Directorate General of Taxes - Drawback
- Tax avoidance - Income Tax
- Tax Evasion - Financial distress
- Fixed assets - Capital Loss
- Intangible assets - State finance
- Non-current assets - Tax provision
- Taxpayer - Applicable law
- Tax audits - Non-disclosure agreement
 Reference or Bibliography

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