Page 4 - Working Paper (Measuring BEPS and Its Countermeasures in Indonesia: A Preliminary Research Guide)

DDTC Working Paper 1717
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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
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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
level.
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
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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.