Bijak Discussion 3: Digital Tax Collection as per the OECD's Recommendations

JAKARTA. MUC Consulting once again held a tax discussion titled Bicara Pajak (Tax Talk) or #Bijak 3 on Wednesday, 13 May, 2020. In this Bijak edition, MUC Consulting raised the theme of the Impact of Covid-19 on international taxation practices by presenting the Director of International Taxation at the Directorate General of Taxes (DGT), John Hutagaol and Director of the MUC Tax Research Institute Wahyu Nuryanto.

In the program hosted by M. Arif Darmawan as the moderator, John Hutagaol presented a number of tax policies issued by the tax authority during the pandemic. Including a policy that hasnbecome a tax issue in recent years, namely the imposition of taxes on e-commerce (PMSE).

Provisions regarding taxation on business actors who conduct e-commerce activities have been regulated in Government Regulation in Lieu of Law (Perppu) number 1 of 2020, which is then outlined in more technical rules in Regulation of the Minister of Finance (PMK) number 48 / PMK.03  / 2020.

On this occasion, John said with the Perppu number 1 of 2020, the government was able to tax electronic transactions of foreign business actors who conduct e-commerce in Indonesia.

Foreign business actors conducting e-commerce in Indonesia will be the subject to Value Added Tax (VAT), Income Tax (PPh) and electronic tax. "So far, we have not yet collected VAT from the delivery of goods from foreign business actors to consumers in Indonesia," said John. 

The tax collection against e-commerce is inseparable from the government's decision to impose a Significant Economic Presence (SEP) as a nexus in order to be able to designate foreign busines actors as Indonesian tax subjects. According to John there are three criterias for an entity considered to have an SEP, namely they have a certain amount of global gross circulation, sales in Indonesia, and the existence of active users of digital media in Indonesia to a certain amount.

However, tax collection on e-commerce is still causing different responses from a number of countries. Especially countries that feel harmed because of taxation conducted on digital companies originating from their country by the Indonesian tax authority.

In addition, up to now there has been no global agreement on the mechanism of digital transaction taxation, especially taxes imposed on digital company revenues. In this regard, Indonesia will respect global consensus.  

Nevertheless, taxation on digital transactions is not prohibited by any institution, including the OECD which will hold a digital tax consensus. In fact, it is the OECD who encourages each country to implement direct taxes such as VAT on digital transaction.

Meanwhile, other speaker Wahyu Nuryanto stressed that there were several issues that had to be considered by taxpayers during the outbreak, especially related to the impact of the Covid-9 epidemic on the implementation of tax treaty and the preparation of Transfer Pricing Documentation (TP Doc). Wahyu suggested taxpayers to record all transactions and anything that happened during the Covid-19 pandemic, especially matters relating to transfer pricing. So that if necessary, taxpayer can show accurate evidence when the company suffered losses caused by Covid-19.

For information, this Bijak 3 activity was carried out through the ZOOM communication application, and broadcast live through various MUC Consulting social media platforms such as Youtube, Instagram and via Twitter in the form of live tweets.To watch again the discussion, you can access it on the MUC Consulting youtube channel via the following link: https://www.youtube.com/watch?v=CmUUi5NjDLw. 

This activity also collaborates with Butterfly Effect, a social movement initiated by MUC Consulting employees who have a great dedication to humanity. Through the Bijak 3 program, Butterfly Effect invites participants and all parties watching the discussion to voluntarily donate part of their assets to be donated to the affected communities Covid-19.