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Indonesia’s stance on global tax governance: UN vs OECD
Fair and equitable treatment between developed and developing countries is something worth endorsing in whatever possible form of global tax cooperation.
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Done deal: Finance Minister Sri Mulyani Indrawati (left) and Organisation for Economic Co-operation and Development (OECD) secretary-general Angel Gurria sign a multilateral instrument on tax treaties at the OECD headquarters on June 7, 2017 in Paris. Through the MLI, Indonesia aims to combat tax base erosion due to the improper use of tax treaties. (Courtesy of Sri Mulyani Indrawati/-)
T
he date of Nov. 22 marked a potentially massive change in the global tax-governance order. On that day, the United Nations voted on a historic global tax resolution that promotes universal, inclusive and effective international tax cooperation, with 125 countries in favor of the resolution, 48 countries against and nine abstaining.
It is interesting to highlight that key Organisation for Economic Co-operation and Development (OECD) member countries like the European Union, the United Kingdom and Japan opposed the resolution.
Indonesia was among those who voted for the new resolution. Even before the vote, Indonesia had been actively engaged in numerous OECD tax projects and is currently in the process of bidding to become a new OECD member.
The question remains, which path will Indonesia choose?
The OECD has been a leading global tax rule-maker for around 60 years. The OECD's contributions to global tax governance have been substantial, shaping the landscape by establishing standards and facilitating cooperation among nations. Its influence and initiatives have been instrumental in fostering international cooperation, establishing standards and addressing tax-related challenges.
Notably, the Base Erosion and Profit Shifting (BEPS) project and the ongoing work of the Two-Pillar Solution imply the significant leadership of the OECD in global tax governance.
However, as stipulated in the UN General Assembly Report dated July 26, UN Secretary-General António Guterres states that the OECD-led international tax reform does not adequately address the needs of developing countries and/or is beyond their capacities to implement. As such, the UN wants to take the reins from the OECD to put forward “fully inclusive” international tax cooperation.
