Page 13 - Working Paper (Measuring BEPS and Its Countermeasures in Indonesia: A Preliminary Research Guide)

DDTC Working Paper 1717
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Nonetheless, similar to macro approach, in prioritizing countermeasures formulation in
this one can also treat CIT-rate difference as the certain area.
factors motivating BEPS activities. For instance,
On the third base, which is in terms of country
a research could be designed in a way to examine
destination for BEPS practices, vital differentiation
the relationship between CIT-rate differences to
should be made at least in two aspects: first,
reported profit in MNEs. This way, we can identify
adjustment regarding relevant affiliated MNEs
the semi-elasticity of profit MNEs due to the changes
existed between destination and home countries.
of CIT-rate differences between the two affiliated
Affiliated MNEs in home country have their
countries. On the other hand, we can also add BEPS
affiliated MNEs located in different countries, with
counter measures – for example, GAAR or SAAR –
each MNEs might have distinct characteristics
to see the influence of these policy in countering
that are important to the formulation of research
BEPS. In other words, we put the counter measures
design. Therefore, determining the magnitude
representing the factors that create disincentives
of profit shifting to specific country require
for MNEs to shift their profit. Similar effort has
comprehensive knowledge about MNEs corporate
been done by Kristiaji (2015), using the financial
structure and their business nature. Second, which
data of affiliated MNEs in developing countries.
is more important, is incorporating the mismatch
Micro approach has plentiful ways in tailoring or loopholes existed between home countries and
the methods to measure BEPS activity, depending destination countries’ tax system. By considering
on the necessities of the research goals. Broadly these two elements, research design could be
speaking, we can divide them into three bases: specifically adjusted to measure specific BEPS
based on certain BEPS scheme, nature of MNEs scheme to certain destination.
business structure, and countries destination for
shifting the profits. On the first base, depending These three basis for differentiating the
on which BEPS scheme it tries to refer, relevant research design and scope may be of crucially
research design could be adjusted to incorporate importance. We can get to narrowed BEPS
the particularities of attributes related to the scheme to be mapped and focused BEPS actors
BEPS scheme. The right tool for measuring BEPS to be targeted, and from which we can produce
practices would be different between the ones a result that can give insight on what kind of
that done through transfer pricing and the ones countermeasures that could effectively eradicate
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that done through debt financing. Particularly, the practices. Additionally, it also enable the
identifying BEPS behavior done through tax treaty government to formulate the countermeasures
shopping also requires different method, as done more efficiently. Davies et al (2014) finds that BEPS
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by Weyzig (2013). This way, we can identify the practices is strongly practiced by certain large
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specific behavior of MNEs in considering certain MNEs in certain countries. This is in contrast with
BEPS scheme. general presumption which perceive that every
MNEs have similar behavior in shifting their profit,
On the second base, regarding the MNEs thus concluding BEPS is widely practiced by many
sector, research scope can be narrowed to MNEs MNEs. Acknowledging BEPS behavior and decision-
operating in certain sectors or criteria. Beer and makings from certain main actors comprehensively
Loeprick (2015) tried this method by investigating would then potentially give government valuable
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firm-specific profit shifting determinants. They ideas on benchmarking other actors. This way,
find result which may provide insights on the the government could produce countermeasures
design of anti-avoidance approach. This could be in efficient and effective way. In sum, insightful
a handful research when government has prior researches that have been previously done are
indication about certain sector in which the MNEs summed in Table 2.
have low compliance level or low reported profit
However, we should keep in mind that certain
that is dubious enough to be presumed that there
BEPS scheme could involve more than two
are profit shifting practices. Having this kind of
countries. We should first define the definition of
research would give direct use for policy makers
term ‘destination’. It is possible that the country
into which profit is shifted could act just as an
38. See, for example, Jarle Moen, Dirk Schindler, Guttorm Schjelderup,
and Julia Tropina, “International Debt Shifting: Do Multinationals Shift intermediary country, not the final destination
Internal or External Debt?” , CESifo Working Paper Series No. 3519
(2011).
39. Francis Weyzig, Taxation and Development: Effects of Dutch Tax 41. Lihat Ronald B. Davies, Julien Martin, Mathieu Parenti, and Farid
Policy on Taxation of Multinationals in Developing Countries (Enschede: Toubal, “Knocking on Tax Haven’s Door: Multinational Firms and Transfer
Ipskamp Drukkers, 2013), 89-115. Pricing”, CEPII Working Paper No. 2014-21 (2014): 10-18.
40. Sebastian Beer and Jan Loeprick, “Profit Shifting: Drivers of Transfer 42. Lihat Peter Egger, Christian Keuschnigg, Valeria Merlo, dan Georg
(Mis)Pricing and the Potential of Countermeasures”, International Tax Wamser, “Corporate Taxes and Internal Borrowing within Multinational
and Public Finance No. 22(3) (2014). Firms”, American Economic Journal No. 6(2) (2014): 26.