Indonesia - Tax avoidance has become a major concern of almost all countries, especially for cross-border business transactions carried out by companies that have special relationships. The Indonesian banking industry is also inseparable from this issue. Tax avoidance practice schemes that may be occured and carried out by third parties (bank as a channel), for instance is the offset of deposit interest with loan interest. Based on studies of several multinational private banks in Indonesia, there are banks that conduct transactions with parties that have a special relationship both Indonesian taxpayers, and foreign taxpayers. Potential tax avoidance practices in the context of transfer pricing in transactions with domestic taxpayers are relatively small. This is because if there is a transfer of income, costs and assets are irrelevant because the parties who transact will be equally charged the same tax rate. However, if the bank status is classified as go public and supervised by the Financial Services Authority, then it is unlikely to do transfer pricing practices using interest cost instruments.

Regarding to tax avoidance potential through treaty shopping, the Indonesian government has stopped tax treaty with tax haven countries such as Mauritius since 2010. Regarding thin capitalization, prevailing laws and regulations, the ratio of fairness of debt and capital to banking business entities is not regulated so that it can be said to be there is a provision of thin capitalization that is effective which applies to the banking industry. If this research uses a conservative approach by referring to the ratio of debt and capital ratio that applies to other industries (other than the financial industry), then the maximum ratio is 1: 4. Most of the national private banks and government banks which have overseas branches only become a remittance function. In addition, the opening of overseas branch offices is to get cheap funds.

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