Tax evasion is the illegal practice of failing to file one’s taxes as per the taxation rules of a particular country. Many people might try to evade paying taxes when there are no clear measures created to address transactions which involve the tax authorities of multiple countries.
With DTAs providing the tax authorities of the countries involved with important information which they may exchange, they are more well positioned to work together to prevent tax evasion.
Tax avoidance is the process by which individuals as well as business entities attempt to avoid paying taxes; however, tax avoidance rather than evasion necessitates that they do so in a legal manner.
Although tax avoidance does not violate any laws of any countries, it nevertheless reduces the total amount of revenue collected by a country’s tax authorities.
Therefore, Indonesia’s tax authorities may work with foreign tax authorities through DTAs in order to limit the prevalence of tax avoidance in the country to a level which is manageable in relation to the country’s current economic condition.