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Indonesia joins global fight against tax dodgers
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A tax officer talks to a taxpayer at the Blitar Tax Office in East Java on Wednesday. (Antara Photo/Irfan Anshori)
T
he government reiterated on Wednesday its commitment to combat tax avoidance practices, as nations around the world have agreed to strengthen their respective taxation systems in an effort to support local economies amid weakening global growth.
Finance Minister Sri Mulyani Indrawati said efforts to strengthen international taxation mechanisms were the key points discussed in a recent G20 meeting in Washington, DC, that were relevant to Indonesia.
As part of a global effort to fight tax avoidance, Sri Mulyani said G20 members, including Indonesia, were expected to implement measures introduced by the Organization for Economic Cooperation and Development (OECD) against base erosion and profit shifting (BEPS) schemes.
The OECD defines such schemes as tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations. Under the inclusive framework, more than 100 countries and jurisdictions are collaborating to implement the measures and tackle BEPS strategies.
Sri Mulyani also said the OECD would work together with the inter-governmental anti-money-laundering body, the Financial Action Task Force (FATF), to strengthen the fight against cross-border money flows that allegedly had elements of tax avoidance and money laundering related to criminal acts, such as drug and human trafficking, as well as financing for terrorism.
“It is very important to build a fair international taxation system because it is impossible to build a global economy together while developing countries face difficulties in tax collection that are due to conditions in which it is easy for companies to avoid paying taxes,” she said.
The recent G20 meeting, which gathered finance ministers and central bank governors from member countries, was held as a part of an annual series of World Bank-International Monetary Fund (IMF) meetings that ran from Oct. 4 to 9.
The G20 meeting also discussed the latest global trend of avoiding taxes through legitimate transactions that were difficult to tax, such as through e-commerce and in online markets, which continuously posed complicated taxation issues for many governments.
Last month, Indonesian tax investigators visited the Jakarta office of US internet giant Google as part of an investigation into the company’s suspected refusal to undergo a state audit of its tax obligations.
Yustinus Prastowo, the executive director of the Center of Indonesian Taxation Analysis (CITA), said the government should be able to negotiate with Google as the UK government had been able to negotiate with social media colossus Facebook, which as a result paid £4.16 million (US$5.08 million) in taxes in the UK last year.
“The UK government possessed accurate data on Facebook and formed a new tax nomenclature through which it could force the company to negotiate. We should also have accurate data on Google operations and revenues in Indonesia in order to start negotiations,” he said.
