Page 9 - Working Paper (Measuring BEPS and Its Countermeasures in Indonesia: A Preliminary Research Guide)
P. 9

DDTC Working Paper 1717

                   •  Level  of detail –  As BEPS  behaviors  involve   between countries, complexity would arise when
                      cross-border transactions,  typically between   incorporating such occassion into the model.
                      related parties, information on related and
                      unrelated party  transactions should be used     Secondly,   from   technical  perspective,
                      when  available.  Affiliate-level  information   determining the type of data  – cross-section,
                      should supplement  worldwide consolidated     time-series,  or  panel  data  – would have each
                      group information when available.             consequence in  having  appropriate model.
                                                                    Afterwards,  selecting appropriate samples to be
                   •  Timeliness –  The provision of most updated
                                                                    used in the measurement would be another issue.
                      data  enables  policymakers  to monitor and
                                                                    In every option, researchers have to identify each
                      evaluate the changes in the BEPS environment
                                                                    limitation and recognize how it affect the reliability
                      and the effects of  legislation. If the time lag
                                                                    of the estimation  result. Thirdly, regarding
                      is  too  long,  empirical analysis  may be more
                                                                    data  provision,  it  would  define  how  far  BEPS
                      of an historical  assessment, thus not  giving
                                                                    measurement could develop  and inform policy
                      substantial benefit for current necessary action
                                                                    makers to formulate effective countermeasures
                      to counter the practice.
                                                                    (assessment on data provision in Indonesia will be
                   •  Access  – The  extent to  which  access  to  data   provided in later section).
                      is provided  to statisticians  and economist
                      within government, and potentially outside of    Nevertheless,  in terms  current practicability,
                      government,  with  strict  confidentiality  rules,   there are several methodologies that can be used to
                      represents would bring advancement to the     measure the magnitude of BEPS. In general, we can
                      development of BEPS measurement progress.     differentiate it into two broad approaches: macro
                                                                    and micro approach. The former view BEPS from
                      Table 1 depicts the OECD’s assessment on the   general  outlook,  or  in aggregate basis, through
                   practicality  of several  type of data  that  can  be   which the measurement produce aggregate result;
                   utilized to measure the magnitude of BEPS.       the latter takes stand point of view from corporate
                   4.3.  Methodology Options for Measuring BEPS     level, thus more of examining the reported profit
                                                                    changes and financial decision behavior.
                      In measuring BEPS in one particular country,
                                                                       This section reviews both  approach and
                   it is difficult to produce robust and reliable result
                                                                    examines each strong elements and handicaps in
                   due to three points of view. First, from substantive
                                                                    measuring BEPS.
                   point of view, it is problematic in relating the factors
                   incentivizing BEPS,  its  pattern and  the schemes   4.3.1.  Macroeconomic Approach
                   channeling  the  profit  shifting  with  the  selection
                   of dependent variables into an estimation model.    In measuring the overall  impact of  BEPS,
                   Besides tax rate difference, it is quite challenging to   macro approach gives holistic idea on how big the
                   incorporate other determinants into the model. For   magnitude. The major indicators that could be used
                   instance, in the case of hybrid financial instrument   to represent BEPS activity include current account,
                   that occurred due to the mismatch in tax system   trade  data,  FDI,  or  CIT  revenue.  These  variables,

                                           Table 1. OECD’s Overview on Several Data Sources

                              Type of Data                                    Review
                              National Accounts (NA)  It measures the economic activity in a country and includes variable such as
                                                    operating surplus, which may be used in BEPS analysis. It is easily accessible
                                                    from international organizations, such as the OECD and the IMF. However,
                                                    the underlying information used to construct the data itself tainted by BEPS
                                                    behaviors – meaning that even widely used measures such as GDP will be
                                                    distorted by a BEPS component that is difficult to disentangle. There are
                                                    significant definitional differences between National Accounts and tax data.
                        Macro Data  Balance of Payment (BOP)  BOP statistics  include  all monetary transactions  between a country

                                                    and the rest of the world, including payments for exports and imports of
                                                    goods, services, financial capital and financial transfers. This encompasses
                                                    information on flows widely used to shift profits, such as purchases and sales
                                                    of trading stocks and services, royalties and interest. The data is accessible
                                                    from Ministry of Trade or World Bank and IMF, but they do not distinguish
                                                    between transactions respecting the arm’s length principle and manipulated
   4   5   6   7   8   9   10   11   12   13   14