Multinational companies will have to pay a minimum tax rate of 15 percent to the country of origin and the countries where their business units operate.
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LARASWATI ARIADNE ANWAR/DIMAS WARADITYA NUGRAHA
·5 minutes read
JONATHAN BUCKMASTER / POOL VIA AP
British Foreign Secretary Dominic Raab (center left) leads his meeting with US Secretary of State Antony Blinken (center right) ahead of the G-7 foreign ministers meeting in London, Monday (3/5/2021).
JAKARTA, KOMPAS — The G-7 group of advanced economies, namely the United States, Canada, Britain, France, Germany, Italy and Japan, have reached an agreement on the minimum tax rates for global companies. Multinational companies will have to pay a minimum tax rate of 15 percent to the country of origin and the countries where their business units operate. But a number of parties consider the tax rate still too low.
“This minimum 15 percent tax rate agreement is a historic breakthrough in global tax reform. The value is sufficient to bring about an increase in world welfare so that the economy can reach the level achieved before the Covid-19 pandemic," said United States Treasury Secretary Janet Yellen after attending a meeting of the finance ministers of the world’s seven strongest economies in London on Saturday (5/6/2020).
After that, it would be further discussed by members of the Organization for Economic Cooperation and Development (OECD), which consists of 139 countries.
British Finance Minister Rishi Sunak said the results of the agreement still had to be discussed at the G20 meeting, which would take place in Italy in July. After that, it would be further discussed by members of the Organization for Economic Cooperation and Development (OECD), which consists of 139 countries.
The agreement received a positive response from multinational companies. Facebook, through its head of global affairs, Nick Clegg, said he supported it because it would increase the world\'s public confidence in the tax system.
"This is good because we can contribute to the economies of the countries we are in," said Clegg.
Google and Amazon also issued similar press releases. They said they were ready to support tax reform.
The idea of global tax reform was first put forward by US President Joe Biden in May because a large number of multinational companies benefit from loopholes that allow them to avoid paying taxes in the countries where they operate. This case is often found in the business practices of multinational companies in the digital field; they only pay taxes in the country of origin or the country where the head office is located.
Not affected
Although the G7 claims that this policy is a historic breakthrough, a number of parties think that it is not significant and will bring no effect on efforts of increasing global prosperity. As reported by The Independent, Gabriela Bucher, the executive director of Oxfam International, the United Kingdom human rights and empowerment agency, said the 15 percent tax rate was too low.
PHOTO BY TOM NICHOLSON / POOL / AFP
British Foreign Secretary Dominic Raab (right) talks while walking with Japanese Foreign Minister Toshimitsu Motegi during their second bilateral meeting on the sidelines of the G-7 foreign ministers meeting in London, Monday (3/5/2021).
Tax haven countries, such as Singapore and Switzerland, have imposed a minimum tax rate of 15 percent. According to Bucher, with this low tax rate, the world would lose US$240 billion in global revenues every year.
According to an economist at the Center of Reform on Economics (CORE) Indonesia, Yusuf Rendy Manilet, the agreement needed further evaluation, especially because the minimum tax rate is not too different from the multinational tax rate imposed by tax haven countries.
"The tax rate is somewhat different from some of the ideal tariffs proposed by a number of economists as input for the global tax rate for multinational businesses, which is in the range of 21 percent," Yusuf said when contacted on Sunday (6/6).
According to him, the issue agreement on global taxes is growing and will further develop because it will be further discussed at the meeting of finance ministers of G20 members in July. After that, there will be long-term talks at the OECD.
However, the global tax agreement will still bring an advantage to Indonesia, one of the countries that are often disadvantaged by lower tax rates in a tax haven country.
In addition to the fact that the agreement that is not final, the agreed tax rate is not much different from the value added tax rate (VAT) of 10 percent on products and services sold through digital platforms to customers in Indonesia.
When contacted separately, the head of the Fiscal Policy Agency of the Finance Ministry, Febrio Kacaribu, was reluctant to comment on the results of the G7 meeting. In addition to the fact that the agreement that is not final, the agreed tax rate is not much different from the value added tax rate (VAT) of 10 percent on products and services sold through digital platforms to customers in Indonesia.
Since early July 2020, 65 global companies have cooperated with the Finance Ministry’s Taxation Directorate General to collect digital VAT. The companies, most of which are located overseas, include Amazon Web Services Inc, Google Asia Pacific Pte Ltd, Google Ireland Ltd, Google LLC, Netflix International BV, and Spotify AB, Facebook Ireland Ltd, Facebook Payments International Ltd, Facebook Technologies International Ltd, Amazon.com Services LLC and Audible Inc.
During a discussion on the Economic Recovery and Fiscal Reform in 2022, held last week, Febrio said that any change in the tax policy would take into account its impact on the economy.
"The current implementation of VAT on trade through the electronic system is an example of Indonesia\'s tax policy response to the economic structure that is shifting toward digital," he said.
AFP
The initial session of the G-7 foreign ministers meeting in London, Tuesday (4/5/2021).
Based on data from the Taxation Directorate General, as of May 31, the government has raised VAT revenues worth Rp 2.1 trillion (US$147 million) from digital products and services. The VAT rate that customers must pay for digital products is 10 percent of the pre-tax price. This tax must be included in the receipt issued by the seller as proof of collection. (AFP/REUTERS)
