One of the common problems
of taxation in the era of globalization is offshore tax evasion by hiding
wealth, or establishing a "doll" company in a tax haven country.
Other issues related to tax evasion are issues relating to transfer pricing of
affiliated companies (transfer pricing), profit management issues of
multinationals through profit shifting, and underlying capital issues through
thin capitalization.
Today, bank secrecy around
the world is starting to soften a bit in terms of taxation along with the
Automatic Exchange of Information (AEoI) momentum. Implementation of the
implementation of both can solve the problem of unhealthy competition between
the state of tax paradise with the state is not a tax haven. Condition,
Indonesia and all countries in the world must be prepared in terms of resources
and regulations. Speaking of regulations, tax treaty between Indonesia and
other countries must be equal means that no one party loses. The anti-avoidance
rule applied refers to the 15 OECD action plans on the BEPS. These policies are
a synergy between countries that can reduce and even eliminate competition in
the field of taxation.
Globalization and capital
mobility will lead to inter-state tax competition. The Company will consider
the elements of taxation in investing to other countries. The investment can be
FDI by establishing host company, stock portfolio, property ownership, and
money storage. The whole country responds to the relationship between capital
mobility and taxes through tax competition. The competition can be "tariff
war", unfair tax treaty agreement, emergence of a "safe" tax
haven country for rogue and corrupt taxpayers, and "comfortable
place" for tax evasion and tax avoidance practices.
The solution, Indonesia
does not need to be too excessive response to the difference in tariffs with
Singapore because it can undermine Indonesia's tax revenue at this time.
Indonesia must be ready for implementation of AEoI, banking openness, tax
treaty optimization, and implementation of OECD recommendations related to
anti-BEPS and avoidance rule. Regional and multilateral agreements can also
minimize inter-state tax competition through "symbiotic mutualism".
Indonesia also concentrates on other elements such as ease of doing business,
adequate infrastructure, and state stability. Finally, excessive tax
competition (unhealthy competition) will ultimately hurt many parties. Tariff
reductions and excessive incentives will only lead to the phenomenon of race to
the bottom. Compete is fair, racing to the top!
Reference:
Bretschger, L., &
Hettich, F. (2002). Globalisation, capital mobility and tax competition: theory
and evidence for OECD countries. European journal of political economy, 18(4),
695-716.
Desai, M. A. (1998,
January). Are we racing to the bottom? evidence on the dynamics of
international tax competition. In Proceedings. Annual Conference on Taxation
and Minutes of the Annual Meeting of the National Tax Association (Vol. 91,
pp. 176-187). National Tax Association.
Endres, Fuest,
Spengel. 2010. Company Taxation in the Asia-Pacific Region, India, and Russia.
Heidelberg: Springer.
Ferrett, B., &
Wooton, I. (2005). Competing for a duopoly: international trade and tax
competition.
UNCTAD, G. (2017).
World investment report 2017
Wilson, J. D. (1999).
Theories of tax competition. National tax journal, 269-304.
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