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Jakarta Post

Digital taxation: Positive signs for developing nations

Digital tax: A man browses Netflix on his smartphone in Temanggung, Central Java. The Taxation Directorate General has started levying tax on technology companies, including Amazon and Netflix.(JP/R. Berto Wedhatama)
Melani Dewi Astuti
Jakarta   ●   Mon, April 19 2021

Taxing the digital economy has been discussed worldwide for the past decade. The debate has been intensifying these days because of the pandemic, which has caused the profits of conventional businesses to drop significantly. In contrast, the profits of many digital businesses have increased during the pandemic as social distancing has made people’s lives more digitally oriented.

The digitalization of the economy has raised significant challenges for taxation, especially income tax. The current rules, as circulated in the tax treaties, only allow market countries to tax income from the digital economy if a company has a physical presence in the market country.

Therefore, market countries are prevented from taxing income that digital businesses obtain from the country’s consumers through the internet if the company does not have a physical presence in tha...

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