Gov't Reveals Two Challenges in Imposing Digital Tax

TEMPO.CO, Jakarta - Tax Director-General of the Finance Ministry, Robert Pakpahan, revealed two challenges the government must deal with in imposing a tax for the digital economy sector or digital tax. The tax includes various sectors from e-commerce, games, financial technology (fintech), peer to peer lending, up to cryptocurrency.

“The first is how to establish fair, competitive regulation and provide legal certainty,” said Robert during his speech as a keynote speaker in an event dubbed 'Taxation on Digital Economy' at Ritz Carlton Hotel, South Jakarta, Wednesday, July 17.

According to Robert, the hurdle is also on how to create a better taxation system in a bid to boost the compliance rate among taxpayers.

The second challenge, the ministry official added, is the tax administration, which is constantly forced to be advance in order to improve the service by utilizing digital technology.

Administrative service system using digital technology will also be demanded to be more integrated in the future. This improvement is expected to lower the cost resulted from the taxation process as a part of the bureaucracy.

Besides, Robert went on, difficulties emerge since the digital economy is different than the conventional one. “The absence of physical form [of taxable institution] is the main feature of the cross-border digital economy, so it opens broaden space for business players to practice tax planning or tax avoidance,” Robert noted.

He added that most of the tax authority in the world is also confronted with these challenges. Even during G20 Summit, the Organisation for Economic Co-operation and Development (OECD) was tasked to find a long-term solution for this issue.

“It was expected to be developed as a global consensus to improve global taxation system related to the digital economy transaction,” Robert said.

DIAS PRASONGKO