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
Ministry of Finance | Directorate General of Taxes – Republic of Indonesia
Ministry of Finance | Directorate General of Taxes – Republic of Indonesia
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
Ministry of Finance | Directorate General of Taxes – Republic of Indonesia
E-Commerce issues has been addressed by OECD and reported in OECD/G20 BEPS Action 1- “Addressing the Tax Challenges of the Digital Economy”
Ministry of Finance | Directorate General of Taxes – Republic of Indonesia
“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
Ministry of Finance | Directorate General of Taxes – Republic of Indonesia
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
Ministry of Finance | Directorate General of Taxes – Republic of Indonesia
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 )
Ministry of Finance | Directorate General of Taxes – Republic of Indonesia
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
Ministry of Finance | Directorate General of Taxes – Republic of Indonesia
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
Ministry of Finance | Directorate General of Taxes – Republic of Indonesia
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
Ministry of Finance | Directorate General of Taxes – Republic of Indonesia
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
Ministry of Finance | Directorate General of Taxes – Republic of Indonesia
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/
Ministry of Finance | Directorate General of Taxes – Republic of Indonesia
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)
Ministry of Finance | Directorate General of Taxes – Republic of Indonesia
Thank you