Page 10 - SUSTAINABILITY ISSUES & COVID-19

is regulated under Article 1 paragraph 6 of the Minister of Finance Regulation Number 215 of 2018, in which it is stated
that the allowed companies are the private companies that are going to be public through an Initial Public Offering; all
companies as a result of divestiture will be public through an Initial Public Offering; companies that are comprised of
conventional and sharia businesses which separate the sharia unit to comply with the regulations; domestic companies
whose spin-offs raise capital of at least Rp 500.000.000 from foreign investment; and state-owned enterprises (BUMN)
that divest as a result of BUMN holding establishments. The business purpose, on the other hand, is regulated under
Article 2 paragraph 2 of the Minister of Finance Regulation Number 52 of 2017. The eligible business purposes are those
that foster a strong business synergy and strengthen the capital structure, not to avoid tax; the divesting tax subject’s
business still operates until the divestiture; the spin-offs as the tax subjects must continue operating for at least 5 years
after the divestiture; the transferred assets and liabilities must not be transferred again for at least 2 years except to
increase business efficiency.

1.2 The Scholes-Wolfson Framework
According to Scholes-Wolfson framework (Scholes et al., 2015), there are three basic elements in the concept of tax
efficiency, which are all parties, all taxes, and all costs: An efficient tax planning should consider all the taxes levied, both
explicitly and implicitly, towards all parties that are involved in the transaction, but the lowest tax expense is not always
the most economical, so all business costs that might incur must be considered. Shackelford and Shevlin (2001) further
elaborate that the aforementioned elements are taken into consideration to achieve the company’s goal, which is to
maximize the value of the company per se. By using Scholes-Wolfson framework, not only is a divestiture able to legally
economize the tax expense of all parties, but it also accommodates the operational aspect of the pawn company. Thus,
Scholes-Wolfson framework is adopting agency theory.

3. RESEARCH METHOD

According to Ellet (2007), case study can be used to analyze and evaluate a decision. This research is a single case
study using qualitative approach. The present case study endeavors to analyze the strategy in transferring assets and
liabilities to new companies in a divestiture process of pawn company and to evaluate the decisions taken by their
management from the perspective of tax planning aspect. To understand the phenomenon of divestment of private
pawnshops, data in the form of descriptive explanations are interpreted and analyzed using a qualitative approach
to examine and analyze the tax obligation implication of the management’s divesting strategy. The unit of analysis
as the object of this study is PT A, one of the biggest private gold pawn companies in Indonesia. PT A was chosen as
the research object due to its operation in 6 provinces without legal basis before POJK Number 31 of 2016 was issued.
Hence, after the enactment of the Regulation, PT A must comply by divesting their business into several companies to
obtain the license to operate legally.

The data used in this research are primary data. The data were collected directly from the management of PT A using
semi-structured interview. The questions are prepared based on POJK Number 31 of 2016 that regulates the scope of
the pawnshop business area and based on Indonesian tax law. Semi-structured interview was held twice with Head of
Finance and Accounting PT A to obtain qualitative and relevant data such as company’s profile, divestiture mechanism,
accounts in the financial statement related to asset transfer and asset transfer strategy of the management of PT A.

The data were then analyzed using content and scenario analysis. First of all, qualitative data in the form of interview
results were analyzed using content analysis technique. Content analysis is a research method used to systematically
evaluate the symbolic contents of all recorded means of communication (Sekaran & Bougie, 2013). In this study,
content analysis was used to investigate the company profile of PT A, related regulations, divestiture mechanism, and
strategies in transferring assets and liabilities planned by PT A. Secondly, the results of the content analysis were further
analyzed using scenario analysis technique, in which possible events that might occur in the future were examined
and evaluated by considering various proper results. By evaluating a decision in the form of a strategy, this study uses
the things described by Ellet (2007) to be considered in analyzing and evaluating decisions, namely decision options
(strategies), decision criteria and relevant evidence. The strategy options were analyzed using the criteria provided in
the table of divestiture implications on taxation by Scholes et al. (2015) with tax planning concept according to Scholes-
Wolfson framework. Then, from those possibilities, which strategy is the most optimal that can be done by PT A.

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