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B. Bawono Kristiaji
The Political Economy of Global Consensus on Taxing Digital Economy
Agenda
1. Introduction2. BEPS & Digital Economy3. Analysis: Prospect of Global Consensus 4. Conclusion
Apr-18
2
Introduction
Apr-18
3
OECD/G20 Anti-BEPS Project:15 Action Plan
Apr-18
4
Transparency &Certainty
Coherence Substance
Preventing Tax TreatyAbuseHybrid Mismatch
Arrangements Measuring BEPSAvoidance ofPE Status
CFC Rules DisclosureRulesTP Aspects of
Intangibles
InterestDeductions TP
DocumentationTP/Risk andCapital
Harmful TaxPractices
DisputeResolutionTP/High Risk
Transactions
Digital Economy (1)
Multilateral Instruments
Digital Economy
Four (4) policy options can be considered as a joint consensus
Apr-18
5
Interim Report (2018)
Apr-18
6
the Interim Report undertook a review of domestic policies implemented in various countries since 2015, particularly on cross-jurisdictional digital economy business taxation
more detailed and precise in understanding digital economy businesses
the practice of tax avoidance driven by digital economy is predicted to decrease
members of the Inclusive Framework have diverse views in addressing the development of digital economy
there is no agreement among the members of the Inclusive Framework regarding the benefits or the need for initial measures before the Final Report of 2020
further exploration of the impact of digitization on the tax system
Profit Attribution and value creation?
Prospect of Global Consensus
Technical Feasibility
Apr-18
7
Modify PE threshold and nexus
Difficulties to revise fundamental system: tax treaty and transfer
pricing
From first-bestto second-best solution?
Prospect of Global Consensus
Technical Feasibility
Apr-18
8
Adopt unilateral action model with flexibility
Remind us of something: debt bias and interest limitation rule
Prospect of Global Consensus
State, Market and Society Interaction
Apr-18
9
State (government
)
Market (digital
business)
Society (civil
society, public, media)
Investment and growth
Pressure: Naming and shaming
Fair share tax agenda
Maximize welfare and
collaborationJustification to
tax
Quick response: interim action
Prospect of Global Consensus
Prospect of Coordinated Actions
Apr-18
10
Heterogenous Preferences
Players in International Tax System
Tax SovereigntySize vs. Scope
Signal of the global
consensus in Interim Report?
Regional agenda: EU Proposal on
Digital Economy
(Interim) Conclusion
Apr-18
11
• The success of the BEPS Project, especially challenge in taxing the digital economy requires political commitment, international cooperation, and compromise among countries.
• From political economy point of view: global consensus on first-best solution will not be achieved.
• The prediction: second-best solution (various unilateral interim actions) will be endorsed by the TFDE. The same case as debt bias and interest limitation rule.
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