Indonesia needs to implement Pillar 2 in the context of international taxation. This can be a door for the country to obtain more optimal tax revenues. This was conveyed by Deputy Minister of Finance II Thomas Djiwandono when giving a speech The 2nd International Tax Forum (ITF) online, Tuesday (24/9).
“Implementing Pillar 2 is no longer an option for Indonesia. If Indonesia does not implement pillar 2, the potential taxes will be taken by other countries. This is the same as subsidizing other countries,” he said.
Therefore, continued Thomas, aligning domestic tax policies with the international tax framework is important. Because, it can support the creation of a fairer and more transparent business and investment climate in global economic cooperation.
“A good investment climate and a healthy fiscal certainly play an important role in supporting a sustainable national development agenda,” he explained.
The implementation of Pillar 2 is also considered important because the international tax system is currently facing two main challenges, namely economic digitalization and fairly aggressive tax rate competition. The rapid development of digital technology makes it easier for multinational companies to operate cross-border and allows them to earn significant income without having to be physically present in the market country.
Apart from economic digitalization, international taxation challenges also occur with competition in tax rates which then encourages practice Base Erosion and Profit Shifting (BEPS).
Also read: G-20 Finance Ministers Call for Progressive Taxes for the Super-Rich
To overcome this, the countries that are members of Inclusive Framework (IF) on BEPS agreed to a Pillar 2 solution, which consists of Global Minimum Tax provisions and Subject to Tax Rules (STTR). Global Minimum Tax has been implemented in more than 40 countries in the world, such as Vietnam, Australia, Japan. Korea, European Union, and several other countries.
Indonesia plans to implement Global Minimum Tax provisions in domestic regulations. Meanwhile, regarding the STTR, on September 19 2024, Indonesia together with several other countries/jurisdictions signed the Multilateral Instrument (MLI) STTR.
Discussions related to Pillar 2 are very relevant to harmonize the understanding of all stakeholders regarding the development of Pillar 2 implementation both in Indonesia and in partner countries.
Also read: Minister of Finance: Increase in VAT rate to 12% depends on the new government
Head of the Fiscal Policy Agency of the Ministry of Finance, Febrio Kacaribu, said that the implementation of Pillar 2 is needed to maintain fiscal sustainability in achieving national development targets in a prudent manner.
This can simultaneously encourage the optimal potential of the tax fiscal space, by taking into account the need for support to the economy in the form of tax incentives.
Several countries, including Indonesia, said Febrio, document the provision of tax incentives and publish them in the form of tax expenditure reports.
Therefore, the 2nd ITF is expected to be an important diplomatic and coordination forum with a series of bilateral meetings with several Indonesian strategic partners. The meeting will provide a good contribution in supporting the creation of effective international tax cooperation.
“Through the collaborative efforts carried out in this forum, robust and sustainable policy recommendations can be developed to navigate the complexity of issues in international taxation and be able to push Indonesia towards a fairer and more efficient global taxation system,” concluded Febrio. (Z-11)
#Implementation #Pillar #Taxation #Important #Indonesia
