Regulatory Impact Analysis of Cross-border Taxation: Doctrinal and Economic Perspectives on Indonesian Anti-Profit Shifting Measures

Abstract

In the era of economic globalization, Base Erosion and Profit Shifting (BEPS) practices by multinational enterprises (MNEs) have become a significant challenge for developing countries, including Indonesia. This study aims to evaluate the legal effectiveness and economic impact of Indonesia’s doctrinal approach in combating cross-border tax avoidance, particularly through profit shifting. The study examines the integration of anti-BEPS policies into Indonesia’s domestic legal system, including the implementation of the substance over form principle, Controlled Foreign Corporation (CFC) rules, General Anti-Avoidance Rules (GAAR), and the adoption of the Global Anti-Base Erosion (GloBE) rules under BEPS 2.0 Pillar Two. The research employs a doctrinal and law and economics approach to assess the success of these regulatory measures. The findings indicate that while Indonesia has demonstrated a strong commitment to aligning its regulations with international standards, major challenges remain in enforcement, the complexity of international tax rules, and data limitations that hinder impact measurement. Economically, these measures have the potential to enhance tax revenues but may also affect investment competitiveness. Therefore, sustained efforts are required to strengthen the capacity of tax institutions, clarify administrative guidelines, and maintain a balance between tax compliance and investment climate. This study contributes to the international tax literature by offering a comprehensive evaluation of Indonesia’s approach to addressing global tax avoidance.