DGT Reveals Indonesia's Chance to Collect Income Tax from Google and Others May Vanish
JAKARTA — The Directorate General of Taxes (DGT) revealed that Indonesia's chance to collect Income Tax from global digital companies, such as Google, may vanish.
This is due to the potential deadlock in discussions regarding the allocation of taxing rights on digital companies' income under Pillar 1 of the global tax solution addressing technological disruption.
Pillar 1 covers global taxing rights for multinational companies with worldwide revenues exceeding 20 billion euros.
Read: OECD Releases Text of Pillar 1 Convention on Global Taxing Rights
Furthermore, companies meeting the criteria must reallocate over 25% of their profits to be distributed to jurisdictions where their customers or service users are located.
Mekar Satria Utama, Director of International Tax at the Directorate General of Taxes (DGT), stated during the "MUC Bicara Pajak" (Bijak) webinar that discussions on Pillar 1 are likely to halt without a decision.
These discussions take place within the Inclusive Framework (IF) under the Organisation for Economic Co-operation and Development (OECD) and the G20.
The OECD/G20 IF released the Multilateral Convention (MLC) draft for Pillar 1, addressing global taxing rights, in October 2023. However, this MLC must still gain approval from other countries.
Indonesia's Expectation
Despite the challenges, the Indonesian government hopes the discussions will continue and that Pillar 1 provisions can be globally implemented.
"For Pillar 1, we are still waiting, but the chances are very slim. We will discuss Indonesia’s stance later," Mekar said on Monday (17/2).
If adopted, Pillar 1 would allow developing countries, which are key markets for digital technology companies, to gain additional tax revenue.
Indonesia has so far been unable to tax the income earned by digital companies selling products or services to consumers in the country. (ASP/KEN)
