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With the development of trade through electronic systems, taxation has become one of the things that are becoming a frequent topic of discussion. The number of transactions through electronic systems, through E-Commerce, creates a discourse on how the tax mechanism for electronic transactions is applied.

Earlier this year, the Government issued Perppu 01/2020, which was later stipulated as Law 02/2020. This law was derived into several implementing regulations, one of which is PMK 48/2020.  Many countries have issued different regulations regarding digital taxes. Indonesia has so far issued technical regulations regarding VAT for digital transactions. Other countries, such as France, have tried to implement what is known as digital services tax. Until now, a derivative regulation from UU 02/2020 has been issued, namely, PMK 48/2020, which regulates the procedures for collecting, depositing, and reporting VAT from outside the customs area. It is feared that the regulation will create the potential for discrimination measurement for business actors and affect the investment climate.

As we know, nowadays, the faster pace of digitalization and COVID-19 pandemic resulted in many companies using digital technology. With the digital economy trend, it became a lot harder to define the ‘digital economy’ as nowadays, almost every physical company we knew is using digital technology. To deal with it, it is better to approach the whole economy rather than only the ‘digital economy.’

To impose taxes on the ‘digital economy’, several principles need to be fulfilled. First, multilateralism (agreement among govt.) makes sure there is no different approach among countries as we know intangible goods know no borders. Second, non-discriminatory. We must make sure rather than imposing taxes only for state revenue, we need to enforce fairness. A Level-playing field and certainty need to be applied so that it does not disrupt the still-growing digital economy in the long-run. Third, simplicity. We need to make sure there is no double taxation and overlapping regulation to ensure that the digital economy can grow even further. Indonesia tends to be the consumer of the digital economy, but in the future, Indonesia has the potential to be the producer.