An international cooperation on taxation is considered crucial to mobilize domestic revenue so that the impact of the Covid-19 pandemic on the economy can be minimized.
By
KARINA ISNA IRAWAN
·4 minutes read
Kompas/Heru Sri Kumoro
A motorcyclist crosses a pedestrian bridge on Jalan Pahlawan Seribu, South Tangerang, Banten, Wednesday (25/3/2020) which contains a service advertisement reminding the reporting and payment of annual tax returns.
JAKARTA, KOMPAS – An international cooperation on taxation is considered crucial to mobilize domestic revenue so that the impact of the Covid-19 pandemic on the economy can be minimized. The cooperation should be focused on efforts to curb tax evasion and avoidance.
The Asian Development Bank (ADB) has proposed the establishment of a regional hub to promote better cooperation on tax policy and administration across the Asia-Pacific region
The hub will serve as an open platform for ADB\'s member countries to share experiences and practical knowledge to help mobilize economic revenue and strengthen international tax cooperation.
ADB President Masatsugu Asakawa said on Thursday that that post-epidemic recovery would be very costly. ADB partner countries, which are mostly developing countries, must increase tax revenues to finance the handling of Covid-19 and to achieve the Sustainable Development Goals (SDGs).
"Tax instruments play an important role in restoring strong growth and enhancing development outcomes," said Asakawa in a virtual seminar held at the bank’s 53rd Annual Meeting.
Although the majority of developing countries have managed to maintain strong and stable gross domestic product (GDP) growth in recent years, tax revenues have not increased proportionately. In fact, tax revenue is at risk of decreasing significantly during the Covid-19 pandemic.
Asakawa said the average tax to GDP ratio of 14.8 percent in countries in Southeast Asia was far lower than the average 24.9 percent recorded by the Organization for Economic Cooperation and Development ( OECD) member countries. The low tax ratio affects the Southeast Asian countries\' ability to recover after the Covid-19 pandemic.
Ironically, Indonesia\'s tax ratio is below the regional average. Data from the Fiscal Policy Agency (BKF) of the Finance Ministry shows that the decline in the tax ratio during 2015-2019 period. The tax ratio fell from 10.76 percent in 2015 to 9.76 percent in 2019. The tax ratio even dropped to a single digit in 2019 and 2017 which was 9.89 percent.
The BKF projects that the tax ratio will further fall to 8.57 percent in 2020, the lowest for more than a decade. The decline in the tax ratio will continue until at least 2021. The tax ratio is estimated to drop to 8.39 percent in 2021 (Kompas, 10/9/2020).
We see there are many natural resource-based companies operating across Indonesia\'s borders. This has opened up many practices of tax avoidance and evasion
Regarding the low tax ratio, Finance Minister Sri Mulyani Indrawati said that the efforts to increase the tax ratio should be carried out together with other countries in the world. An international cooperation, for example, played a key role on combating tax avoidance and evasion, she added.
"We see there are many natural resource-based companies operating across Indonesia\'s borders. This has opened up many practices of tax avoidance and evasion,” she said.
SUMBER: BADAN KEBIJAKAN FISKAL KEMENTERIAN KEUANGAN
Tax Ratio to Gross Domestic Product.
More than 94 countries
Indonesia has cooperated with 94 counties on Automatic Exchange of Information (AEoI). From this cooperation, Indonesia has already received 1.6 million pieces of data, with potential tax payment worth up to 246.6 billion euros.
Sri Mulyani said such an international cooperation opened up opportunities for the wider exchange of tax information. With the cooperation, the government can minimize the potential losses caused by tax avoidance and evasion so that the tax revenues could be optimized, she said. Indonesia has participated in international tax cooperation initiated by the World Bank, International Monetary Fund (IMF) and OECD.
In 2019, according to the Tax Directorate General of the Finance Ministry , in 2019 the potential tax losses caused by the tax avoidance and evasion recorded under AE-OI reached Rp 1.3 quadrillion. The practices are generally carried out by hiding assets abroad especially in tax haven countries.
Pascal Saint-Amans, the director of the OECD\'s Center for Tax Policy and Administration, said the exchange of information, among others, included the collection of Value Added Tax (VAT). The mobilization of domestic revenues using VAT instruments can become an important solution in the midst of the Covid-19 pandemic.
"There are many new activities and habits that have emerged due to the pandemic, especially related to the transnational digital economy. VAT tax can be optimized to increase income, "he said.
