E-Commerce: A Challenge to South-South Cooperation · Google-Temasek. e-conomy SEA Report Unlocking the $200 billion digital opportunity in Southeast Asia . South East Asian Countries’

Ministry of Finance | Directorate General of Taxes – Republic of Indonesia

E-Commerce: A Challenge to South-South Cooperation

JW Marriot Surabaya, December 1st, 2016The Inaugural Annual Forum on Developing Country

Tax Policies and Cooperation for Agenda 2030

A.H. Rangkuti, S.E., Ak., M.E-Biz., M.Sc



On December 12th, 2012 Google Chairman-Eric Schmidt’s Response when he was asked by Bloomberg about Google’s Tax Avoidance Scheme in UK :

“We pay lots of taxes; we pay them in the legally prescribed ways”. “I m very proud of the structure that we set up…”

Source: Huffpost, 2012


E-Commerce issues has been addressed by OECD and reported in OECD/G20 BEPS Action 1- “Addressing the Tax Challenges of the Digital Economy”


“The sale or purchase of goods or services, conducted over computer networks by methods specifically designed for the purpose of receiving or placing of orders“Source:OECD/G20 Base Erosion and Profit Shifting ProjectAddressing the Tax Challenges of the Digital EconomyBEPS Action 1: 2015 Final Report

“The trading of goods and services byusing electronic mechanism“Source:Circular Letter of the Director General of Taxes of IndonesiaNo SE-06/PJ/2015

E-commerce


Taxation Principles to E-Commerce set up by Ottawa Ministerial Conference on E-Commerce, 1998

• Tax rules should be neutral and equitableNeutrality

• Minimizing compliance costEfficiency

• Tax rules should be simple and understandableCertainty and

Simplicity

• Should produce the right amount of taxEffectiveness and Fairness

• To ensure that the system keep pace with technological and commercial developmentsFlexibility

Source: BEPS Action 1: Address the Tax Challenges of the Digital Economy, 2014


Source:Google-Temaseke-conomy SEA ReportUnlocking the $200 billion digital opportunityin Southeast Asia

South East Asian Countries’ E-Commerce Market in 2015 and Projection for 2025(Research by Google – Temasek, Singapore, Sep 23rd, 2016 )


Letter of the Director General of Taxes of Indonesia No S-702/PJ.332/2006, August 24th, 2006

Circular Letter of the Director General of Taxes of Indonesia No SE-62/PJ/2013, December 27th, 2013

Circular Letter of the Director General of Taxes of Indonesia No SE-06/PJ/2015, February 5th, 2015

Establish a Task Force for Tax on E-CommerceDirector General of Taxes Decree Number KEP-71/PJ/2016, April 25th, 2016

How Does Indonesian Tax Authority React to E-Commerce Issues?

2006

2013

2015

2016


Brick and Mortar Documents

E-Commerce Documents Brick and Mortar

Transactions

E-Commerce Transactions

General Provisions and Tax Procedures

Income Tax

VAT

Tax Law

2006Letter of the Director General of Taxes ofIndonesia No S-702/PJ.332/2006,August 24th, 2006

2013Circular Letter of the Director General ofTaxes of Indonesia No SE-62/PJ/2013,December 27th, 2013

INDONESIA’S E-COMMERCE REGULATION


Transaction Model

Online Marketplace• Media Provider• Intermediary Service• Other Services• Purchase Transactions

Classified Ads• Media Provider• Other Services• Following

TransactionsDaily Deals

• Media Provider• Intermediary

Service• Other Services

Online Retail• Purchase

Transactions –Goods

• Purchase Transactions –Services

• Other Services • Individual Income TaxArt. 21

• Treasury WitholderArt. 22

• Corporate Income TaxArt. 23• Non-resident

Taxpayer other than Permanent Establishment

Art. 262015

Circular Letter of the Director General of Taxes ofIndonesia No SE-06/PJ/2015, February 5th, 2015

INDONESIA’S E-COMMERCE REGULATION (Cont’d..)

Withholding Income Tax


Key Challenges in Taxing E-Commerce

1Identification of E-Commerce Players

2Taxing Rights 3

Taxing Mechanism

Low or

No Taxes

Double Taxation

OR

Source:1. BEPS Action 1: Address the Tax Challenges of the Digital Economy, 20142. Fiscal Policy Agency, Ministry of Finance of the Republic of Indonesia, 2016


South Bulletin 92, August 4th, 2016 Manuel F Montes, Senior Advisor on Finance and Development at the South Centre: “The Panama Papers Demonstrate the Need for Truly Global Tax Cooperation”

“The BEPS outcome did not respond to the most critical needs of developing countries in tax cooperation, even though the cooperation of developing countries would be required to make the BEPS proposals be effective even in meeting the needs of developed countries”

Source: http://www.southcentre.int/


Suggestions about Taxing on E-Commerce

1. Follow up discussions about taxing on E-Commerce for Developing Countries, facilitated by South Centre, to formulate an E-Commerce framework.

2. To establish multilateral agreements among South Centre members regarding to tax E-Commerce transactions.

3. South Centre and all members need to actively involved in International forums (i.e. OECD Meetings)


Thank you