In Review of Digital Tax, DDTC Sponsored a University Student to Sydney

The University of New South Wales (UNSW) Business School held 13th International Conference on Tax Administration on 5 and 6 April 2018 at Coogee Crowne Plaza, Sydney, Australia. The conference held by UNSW every two years brings together prominent tax administrators, academicians and tax practitioners from all over the world to discuss current issues in the field of taxation. This year, the theme is “Tax System Integrity in a Digital Age”.

Lusi Khairani, a Master Student of Accounting FEB University of Indonesia, attended the conference. She was given the opportunity to present the results of her thesis. Her departure was financially supported by DDTC through the corporate social responsibility (CSR) program.

Lusi states that her dream of bringing this contemporary material in the world of international taxation has finally been achieved and the topic she would bring forth was the case study of Facebook tax. “I would like to thank everyone who has given support that I was able to be a speaker in an international conference,” said Lusi.

Facebook Singapore Study Case
The event was opened by Professor Chris Styles as the Dean of UNSW Business School, UNSW Sydney, who welcomed all the delegates present at the conference.

The event ensued with the plenary session by Neil Olesen, Second Commissioner of Taxation, Australia (Client Engagement Group) and Sharon Thompson, Deputy Commissioner of Customer & Compliance Services New Zealand, each of whom conveyed the changes made by tax administrators in Australia and New Zealand in facing challenges in the era of digital economy.

After the morning tea break, the event was divided into 3 groups (A, B, and C) according to the topic of each paper to be presented. Lusi’s paper entitled “Tax Analysis on Implementing BEPS Action Plan 1 in respect of the digital economy in Indonesia: A case study of Facebook Singapore Pte Ltd” was grouped with a paper entitled “Tax design and administration in a post-BEPS era: A study of key reform measures in 16 countries “written by Kerrie Sadiq, Adrian Sawyer & Bronwyn McCredie from Queensland University of Technology and University of Canterbury.

Lusi explained that the paper, the analysis results of her thesis regarding the issuance of the Circular Letter of the Minister of Communication and Informatics No. 3 of 2016 which requires Foreign Over The Top (OTT) Service Providers to establish permanent establishments (PE) in Indonesia. If associated with Facebook Singapore Pte Ltd whose PE determination is based on the provisions contained in the Indonesia-Singapore tax treaty, inconsistencies are found between the Circular Letter and the Indonesia-Singapore tax treaty.

Based on the tax-treaty Facebook does not establish a PE in Indonesia as the business activities conducted are only related to marketing research but it is actually required to establish a PE based on Circular Letter No. 3 Year 2016.
“This policy is analyzed using tax treaty override theory, tax avoidance and benefit theory of taxation,” Lusi claimed when describing the research method chosen in her paper.

Based on the analysis using the three abovementioned theories, Circular Letter No 3 Year 2016 cannot be applied in Indonesia although Indonesia should be able to impose taxes on income derived by Facebook from Indonesia as the Indonesian government has provided public services for Facebook to earn revenue.

The policy alternatives offered in BEPS Action Plan 1 are then analyzed for possible implementation in Indonesia although in the end the significant economic presence, withholding tax and equalization levy policies are still not possible to be implemented in Indonesia without prior revision in terms of the provisions in Indonesia-Singapore tax treaty.

Lusi and One of Her Dreams
The opportunity to present a thesis in an international conference is a dream that finally comes true for Lusi. Because, prior to the golden opportunity, the cost was always haunting after Lusi received an e-mail from the 13th International Conference on Tax Administration committee. In the email conversations, Lusi’s paper was declared eligible to perform in Sydney. Lusi immediately exchanged thoughts with her supervisor while taking the Master program. DDTC, a local tax institution with educational missions, occurred in their mind.

Shortly, Lusi made a proposal for a grant. With open arms, Lusi’s proposal was immediately welcomed by DDTC. Through a number of meetings and discussions with the Head of DDTC Fiscal Research Bawono Kristiaji, one of Lusi’s dreams finally came true. Lusi did not forget to thank everyone who has shown support, especially DDTC.

“Remarkable! I hope DDTC more success in the future and always considers human resource development, DDTC is great!” she said.