Profit-oriented companies are likely to minimize the tax burden through tax planning and tax avoidance mechanisms. The concept of tax planning according to Barry Larking (2005) is the efforts made by taxpayers in order to minimize their tax payments. Meanwhile, the definition of tax avoidance according to Muhammad Zain (2007) is a process of detecting gaps in taxation legislation that are processed in such a way that a tax avoidance method is found to save the amount of taxes paid.
Based on those opinions, the conceptual relationship between tax planning and tax avoidance are both aim to minimize the amount of tax that must be paid, but tax avoidance is more massive because tax avoidance efforts are in accordance with existing regulations. This mechanism is acceptable because since it remains follow the corridors of tax law.
It is different from the tax evasion defined by Michael Mclyntre (2000), namely efforts to reduce tax burden or tax avoidance by not reporting income or reporting but the value is not true. This mechanism is not permitted by the tax authorities because it violates existing tax regulations and tax sanctions may be imposed. Especially if it is accompanied by smuggling or hiding goods and assets.
Thus what is allowed according to taxation regulations is tax planning and tax avoidance, while tax evasion is a form of fraud due to the act of hiding facts, manipulating transactions to cause costs or losses, destroying evidence and resulting in criminal sanctions. This mechanism is widely used by multinational companies that never pay income tax because they are suspected of having suffered losses. This then became the focus of government attention.
tax-avoidance , tax-evasion , tax-planning
