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• The separation of taxable profits from the it cannot give us idea about how MNEs channeled
location of the value creating activity is the activities and how they behave in certain or
particularly linked to intangible assets. specific condition. Meanwhile, micro approach
Despite the existence of results confirming could give us more information about this, but it
BEPS existence and magnitude for certain group of does not provide aggregate impact of the practices.
countries, assessing the scale of magnitude as well
Therefore, to gain maximum knowledge that
to a specific country would be critically important.
can be reaped, we should utilize relevant research
It is not obvious whether any measured magnitude
approach within a structured framework so that
should be viewed as being “large” or “small” for
every research could produce building blocks that
policy purposes, but the most crucial necessity
can be used for further research. More importantly,
for a government is to monitor its development
identifying data limitation and the possibility to
in aggregate or in specific scope to identify the
have the data would be beneficial in determining
behavior and map countermeasures with a
what set of research could be potentially done
structured strategy and clear priority. 27
in the future and what actions are necessary
Any policies that are purposed to counter BEPS for government to provide procedure to ensure
obviously need framework that can measure the important data are accessible for research purpose.
scale of such activities. A measurable magnitude
4.1. Defining BEPS for Research Purpose
with mapped behavior would help policy makers
in formulating framework through which BEPS Before measuring BEPS practices, we should
countermeasures can be designed and developed. first understand the basic technical nature of them.
Measuring BEPS could be one starting step to The relationship between MNEs behavior and
acknowledge how much revenue lost caused from government as tax policy maker is multifaceted.
such practices. Several efforts have been made only Decisions of government regarding corporate
developed countries or European region, while taxation affect the decisions of multinational
according to Crivelli, de Mooij, and Keen (2015), firms regarding where to locate economic
developing countries are ones who suffered the activity and where to book profits. On the other
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most. Acknowledging the magnitude of BEPS and spectrum, multinational firm decisions also impact
the determinants for its each scheme are crucial to governments, affecting the amount of revenue that
plot the behavior and find specific way to counter they receive and ultimately the tax policy design.
it.
Multinational firms then have both financial
4. Assessing Data and Research Tool and real responses to the taxation of corporate
Options income. Financial responses to corporate taxation
include efforts to shift income to more lightly taxed
locations. For instance, multinational firms may
Practically, studies on BEPS are yet to produce
alter the transfer prices assigned to international
solid results that can explain the magnitude of
trade with affiliates, alter the structure of affiliate
BEPS practices. This could not be separated with
finance, or change the location of royalties and
the fact that in Indonesia, as in most developing 30
intangibles. Real responses to international
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countries , data inadequacy is the main obstacle
tax incentives include locating more assets,
for researcher or policy maker to measure BEPS.
employment, and economic activity in low tax
Different approaches used in measuring BEPS
countries. While both financial and real types are
would generate different results that could
likely to affect government tax revenue, they have
elucidate different dimension of BEPS. Relatedly,
distinct policy implication.
each of them has their own limitation. For instance,
macro perspective approach would generate us Most of existing analyses are limited to a
result showing aggregate impact caused by BEPS single country or MNEs headquartered in a
activities. The most usual proxies representing single country, where access to company surveys,
the impact are CIT revenue or CIT base. However, corporate tax returns, or company trade data are
made available to researchers on a confidential
27. See, for example, Thiess Buettner and Georg Wamser, “Internal basis, or based on analyses of MNE affiliates in
Debt and Multinational Profit Shifting: Empirical Evidence from Firm- multiple countries from a limited number of
Level Data”, National Tax Journal No. 66(1) (2013): 63-96. They found financial databases. Unfortunately, similar data is
indication that German CFC rule is effective in shifting profit through
internal debt. not available for Indonesia, and thus the results
28. Ernesto Crivelli, Ruud De Mooij and Michael Keen, “Base Erosion, from those studies are specific to those countries’
Profit Shifting and Developing Countries”, IMF Working Paper WP/15/118 MNEs, and would not necessarily be representative
(2015).
29. GIZ Sector Programme Public Finance, Addressing Tax Evasion
and Tax Avoidance in Developing Countries (Eschborn: Deutsche 30. Kimberly A. Clausing, “Multinational Firm Tax Avoidance and Tax
Gesellschaft, 2010). Policy”, National Tax Journal Vol. LXII, No. 4 (2009): 703-704.