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Jakarta Post

Taxing digital economy, should we wait?

  • Toriq Rahmansyah and Dimas Hermawan Novi Adhi

    Finance Ministry officials

Jakarta   /   Thu, October 10 2019   /  12:54 am

JP/Dhoni SetiawanMany countries are now facing a major issue concerning digital economies: they cannot impose taxes (either direct or indirect) on digital companies selling digital and non-digital goods or services through websites or online platforms. This issue arises because current international tax rules are no longer compatible with digital business models.For direct taxes, especially income tax, a source country cannot tax digital companies because there is no nexus or relationship between an income and the country where the income is generated. Due to international tax rules, a source country has the right to tax business profits derived by foreign residents only if there is a fixed place of business called a permanent establishment (PE) in the country. Unfortunately, in many tax treaties, including those of Indonesia, the word “fixed place” mainly refers to a physical presen...