Digitalization and Taxation in Asia

Abstract

ADSAutomated Digital Service B2B Business to Business B2C Business to Consumer BEPS Base Erosion and Profit Shifting CbCR Country by Country Reporting CIT Corporate Income Tax Destination country Country in which the purchaser is located (same as market country) DST Digital Services Tax EL Equalization Levy EU European Union FA Formula Apportionment FDI Foreign Direct Investment G20 The G20 is the international forum that brings together the world's major economies GDP Gross Domestic Product GST Goods and Services Tax ICT Information and Communications Technology IF Inclusive Framework Investment Hub Generally refer to countries with a high ratio of FDI to GDP. For example, the OECD considers those countries with inward FDI greater than 150 percent of GDP to be an investment hub. Market country Country in which the purchaser is located (same as destination country) IGST Integrated Goods and Services Tax MNE Multinational Enterprise OECD Organisation for Economic Cooperation and Development v ©International Monetary Fund. Not for Redistribution DIGITALIZATION AND TAXATION IN ASIA DIGITALIZATION AND TAXATION IN ASIA vi ©International Monetary Fund. Not for Redistribution DIGITALIZATION AND TAXATION IN ASIA DIGITALIZATION AND TAXATION IN ASIA viii ©International Monetary Fund. Not for Redistribution This page intentionally left blankDigitalization has been impacting countries in Asia and this effect is set to grow in the aftermath of the COVID-19 pandemic. Digitalization has extended well beyond the information communications and technology (ICT) sector, with widespread internet usage underpinning e-commerce, fintech, as well as online financial and other services. In addition to firms selling goods and services through their own websites, online platforms and marketplaces have rapidly emerged that connect firms with consumers and consumers with each other. These business models are supported by cutting edge technologies, including artificial intelligence, machine learning, and big data. Local firms have emerged as major players, particularly in large markets such as China, Japan, and Indonesia, competing with US multinational enterprises (MNEs) operating in the region. The potential for further growth in internet usage and the shift away from in-person activities during the pandemic is likely to fuel the growth of large, digitalized businesses in Asia in coming years, as well as the adoption of digital technologies across the entire economy.The experience of digitalization varies across Asian countries depending on demographics, geography, and the stage of economic development. G20 economies such as China, Japan and Korea have large ICT sectors, including manufacturing, and well-established, locally headquartered, highly digitalized businesses engaging in e-commerce and online services. India and Indonesia are also rapidly developing markets for e-commerce and online services, with emerging local firms. Advanced services-based economies such as Australia and New Zealand are highly digitalized, although ICT-led manu...

Analysis Of The Implementation And Implications Of OECD/G20 Pillar One On The Taxation System In Indonesia

“…This is undeniable because intangible assets are crucial factors from company's production (Hall, 2001 as cited in Dischinger & Riedel, 2011). Intangible assets also pose challenges because they are more difficult to measure in value and easier to transfer or relocate by the company (Li, 2018;Beer & Loeprick, 2015in Dabla-Norris et al, 2021Worokinasih et al, 2022). Most MNEs also can transfer intangible assets to countries with lower tax rate (Dischinger & Riedel, 2011).…”

“…This is mentioned by Li (2018) and Tambunan (2021) in their research, highlighting the potential increase in tax revenue that developing countries could experience due to the implementation of these provisions. The potential increase in tax revenue for market jurisdiction, which are middleincome countries like Indonesia, is estimated to be around 5 percent or 0.02 of GDP (Dabla-Norris et al, 2021).…”

“…Dabla-Norris et al ( 2021) and Jacobs (2022) states that on the contrary, developing country including Indonesia are not expected to benefit significantly from the implementation of the provisions in Pillar One. Dabla-Norris et al (2021) states that the potential revenue gain for these developing countries is very low or even the opposite, with the possibility of them to losing revenue around 0.01 percent of GDP. Bauer (2020) also mentions a similar concern that the provisions in Pillar One could potentially shift taxing power from developing countries to developed ones.…”