Tax avoidance is an issue faced by various countries that often use by various companies to reduce their income tax burden. Tax avoidance can be interpreted as a reduction in direct taxes (Hanlon and Heitzman, 2010). This actions includes many strategies broadly, including tax avoidance and reduction strategies that are entirely legal the other hand, such as bond investors and other tax planning strategies such as “Evasion,” “Non-Compliance,” “Aggressiveness,” and “sheltering.”
The aims of tax avoidance is to save cash flow in the opposite of the company, which is to incur costs that are more expensive than they should be. Therefore a strategy is issued to overcome tax deductions only in the short term but at the same time also provide stable tax planning in the long term. This strategy is referred as a sustainable tax strategy.
A sustainable tax strategy itself can be interpreted as a strategy where companies can think of effective tax strategies not only in reducing explicit tax costs but also in thinking about how to reduce other costs, both tax and other costs so that the company’s value can be increased in the long term. Tax-deductible costs are not only focused on the short term but can also maintain tax performance stabilization and do not giving very significant changes in the longer term.
In carrying out a strategy like this, several things must be considered also pretty challenging to do, such as financial performance and non-financial task such as social contribution, environmental protection, and ethical management. The company carrying out sustainability management task will help the success of the company’s sustainable tax strategies.
Tax avoidance is the proper action in the corporate tax strategy. However, with today’s modern view, saving tax costs is not entirely a very good strategy because it needs to face the risks that exist. But a good strategy is one where companies can choose the best and most stable strategy in the long term to improve their company’s performance.
Credits: Lawrence Christian, Agent of Artax