Anticipating Pillar 2 of Global Tax Rules, Domestic Minimum Tax Instruments Are Prepared

Friday, 28 October 2022

Anticipating Pillar 2 of Global Tax Rules, Domestic Minimum Tax Instruments Are Prepared

JAKARTA. The government has begun to prepare a strategy to minimize the impact of the imposition of the minimum tax rate contained in Pillar 2 of the global tax consensus.

The impact of the implementation of the minimum tax rate is that the provision of fiscal incentives such as tax holidays or tax allowances will no longer be effective in attracting investment from international multinational companies.

Referring to the provisions of the Global Anti Base Erosion (Globe), if a country provides tax incentives below 15% to a subsidiary of a multinational company with income above 750 million Euros, the country where the parent company is located can impose a top-up tax according to the Income Inclusion Rules (IIR).

Quoting Bisnis Indonesia, Thursday (27/10) edition, one of the steps prepared by the government is to develop a Qualified Domestic Minimum Top-up Tax (QDMTT).

Read: Is Indonesia Ready to Adopt the Two-Pillar of Global Tax Architecture?

Later, QDMTT will be implemented in conjunction with Pillar 2, which is also referred to as the Globe provisions, so that they will complement each other.

With the enactment of the QDMTT, the taxation of multinational companies covered by the Globe provisions can be carried out by the government and become a source of state revenue.

Thus, Globe's provisions will not erode Indonesia's tax base in the future.

Opportunistic Policy

Meanwhile, during the transition period, until the Pillar 2 policy takes effect in 2024, the government will still provide incentives to attract investment.

Read: Who Benefits The Most from the Global Tax Consensus?

For example, in encouraging development in the new National Capital City (IKN), the government offers various tax incentives that are quite large, ranging from tax holidays to super tax deductions.

Minister of Finance Sri Mulyani stated that such opportunistic policies were needed in order to maintain state revenues and the investment climate at the same time.

In addition, the government is also considering the provision of incentives that are ideal and safe from the Globe's provisions.


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