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DDTC Working Paper 1717

                   some  analysis  is better  than  working  without   the effort to boost international trade.  At the same
                   empirical-based evidence at all, but such analyses   time, the interaction of domestic taxation between
                   must also recognize  the limitation  of  currently   countries and  the development  of technology
                   available data and how those limitations may affect   have  risen  significantly  over  time.  This  situation
                   the reported results.                            potentially leads practices to exploit the loopholes
                                                                    between countries’ tax system.  7
                      Therefore, the urgency is clear that  a
                   comprehensive   assessment  about  currently        In practice, the increasingly complex schemes
                   feasible data and information and future sufficient   of tax  avoidance have left  the development  of
                   methodology  is  of  crucial importance to identify   domestic  taxation  laws adjustment  to deal  with
                   the  BEPS-impact   magnitude  and   evaluate     tax  avoidance  efforts  far behind.  It becomes
                   the effectiveness  of BEPS countermeasures.      economically rational  for  MNEs to divert their
                   Accordingly,  this  paper  outlines  the  benefits  and   profits  to  their  affiliated  companies  located  in
                   limitations of the different types of data. Moving it   certain countries that have lower corporate income
                   further, this study also identify new types of tools   tax rate. The adoption of difference tax rate among
                   and data that should be collected in the future. New   countries in the world has driven the emergence
                   data could include capitalizing on existing data that   of  aggressive tax  planning  by multinational
                   is currently unavailable, either due to confidentiality   companies.  Furthermore,  the  practice  of  profit
                   reasons or because it is not currently processed or   shifting  by multinational  companies  from  a
                   analyzed, as well as additional information needed   country with higher  corporate income  tax  rate
                   for monitoring  BEPS  in  the  future, taking  into   to  other  countries  with lower  corporate  income
                   account ways to reduce administrative costs for tax   tax rate has eroded potential taxes that should be
                   administrations and businesses.                  accounted  as government revenue in the former
                                                                    country. Consequently, the government revenue in
                      Hence,  this paper  provide  a glance of  work
                                                                    the former country would not reach its optimum
                   providing research framework  which elucidates
                   which research methodology or research are exist,
                   feasible, or  should  be feasible in the future. The   The practice  of tax  avoidance  done by
                   hope is that  every  produced  countermeasures in   multinational companies is known as Base Erosion
                   the future could be well formulated and evaluated   and Profit Shifting (BEPS). It has been an important
                   so that BEPS practices and the incentives could be   concern  for  developing countries  since  revenue
                   effectively tackled. This paper also assess currently   will remain to be a key pillar to drive their national
                   available  and accessible  data,  which  are vital  to   development.
                   determine what could be done and how specific and
                   accurate  we  can measure  the magnitude of  both   However, efforts  to  counteract the practices
                   BEPS activities and the existing countermeasures.  globally  are  significantly  hampered  by  the
                                                                    sovereignty of each  country to  determine  its
                      The structure of the paper is divided  into six   taxation  policies respectively.  The absence  of
                   section. Second section describes  the necessary   harmonization and the lack of cooperation between
                   concept of BEPS which is needed for measurement   countries have led to the emergence of unilateral
                   matters. Third section follows with the reasoning   actions from each country which certainly have
                   of  the urgency to measure BEPS and its          impacted  on non-conformity  rules, business
                   countermeasures.  Fourth  section  comprises  data   uncertainty and competition of CIT rate reduction.
                   and tools assessment that are necessary to conduct   Finally,  the  most  benefited  countries  from  BEPS
                   the research. Fifth section tries to demystify what   practices are countries  that  able  to set very  low
                   research plan the government needs to do based   tax rate (tax haven) and offer confidentiality of the
                   on the currently available data and the potential in   information. 10
                   the future. Finally, sixth section conclude the paper.
                                                                    6. Darussalam and Ganda C. Tobing, OpCit., 3-5.
                   2.  The Concept of BEPS                          7.  OECD,  Action Plan  on Base  Erosion and  Profit  Shifting  (OECD
                                                                    Publishing, 2013), 7-8. Lihat juga OECD,  Addressing the Tax
                                                                    Challenges  of the Digital Economy,  Action 1: 2014 Deliverable
                      The incapability  of the international  tax   (Paris: OECD Publishing, 2014). Dapat diakses di  http://dx.doi.
                   regime to adjust quickly with global  business   org/10.17879789264218789-en.
                                                                    8.  Arthur J.  Cockfield, “BEPS  and Global Digital Taxation”, Tax  Notes
                   development has been initiating the multinational
                                                                    International, (September 2014): 934.
                   entities (MNEs) to minimize their tax liabilities by
                                                                    9. Arthur J. Cockfield, “Introduction:  The Last Battleground  of
                   artificially shifting their profit to lower or no tax   Globalization”, in Globalization and Its Tax Discontents: Tax Policy and
                                                                    International  Investment,  ed. Arthur J. Cockfield (Toronto: University
                   jurisdiction.  Current  taxation  rules  have  focused
                                                                    Toronto Press, 2010), 5.
                   mainly on the prevention of double  taxation  and
                                                                    10. Charles E.  McLure, Jr.,  “Will the OECD Initiative on Harmful Tax
                                                                    Competition Help Developing and Transition Countries?”  Bulletin  for
                                                                    International Taxation, Vol. 59, No. 3 (2005): 92.
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