Towards Global Minimum Tax: The Share of Corporate Income Tax Worldwide Increases

JAKARTA. The Organisation for Economic Co-operation and Development (OECD) revealed that the trend of Corporate Income Tax revenue in the world is increasing.

Referring to the Corporate Tax Statistics report released on Thursday (11/7), the average portion of corporate income tax revenue in 123 jurisdictions to their total tax revenue in 2021 rose to 16% compared to the previous year which was only 12.5%.

This increase is thought to be due to a number of countries or jurisdictions making adjustments to their tax policies with plans to implement a minimum effective corporate tax rate of 15%, as stipulated in Pillar 2 of the global tax provisions.

Not only that, the global average ratio of corporate income tax to gross domestic product (GDP) also increased to 3.2% in 2021 from the previous year which was only 2.6%.

Meanwhile, according to this report, the portion of Indonesia's corporate income tax revenue in 2021 is above 40%. The condition of Indonesia's corporate income tax revenue is similar to several other countries in the world, namely Bhutan, Equatorial Guinea, Malaysia and Timor-Leste.

The portion of corporate income tax revenue in Indonesia is higher than the average of 31 countries or jurisdictions in Asia-Pacific which is only 18.2%.

According to the OECD, the difference in the portion of corporate income tax revenue in each country is influenced by several factors such as differences in legal entities, tax rates, and other factors related to policies in a country or jurisdiction.

Some of these other factors include: 

1. The extent to which companies in a jurisdiction are established
2.  How broad the corporate income tax base is 
3. The economic cycle and tax cycle of the company
4. The country's reliance on other tax revenues, such as personal income tax or consumption tax
5. The country's reliance on tax revenues related to Natural Resources
6. Other instruments that affect tax payments

Therefore, the size of the corporate income tax revenue in a country cannot be used as a basis to conclude tax avoidance behavior through Base Erosion and Profit Shifting (BEPS). Although it cannot be denied, BEPS has a significant impact on corporate income tax revenue. 

Stable Corporate Income Tax Rate

In this report, the OECD also notes that the average corporate income tax rate in the world from 2019 to 2024 is relatively stable at a rate of 21.7% in 2019 and 21.1% in 2024.

Corporate income tax rates covered in this report include rates applicable at the central government level, central government level excluding any additional taxes, local tax deductions at the central level, taxes at the local government level, and combined taxes. (ASP/KEN)