Technological Advances and Increased Tax Revenue

IN today’s modern life the boundaries between countries seem to be no longer needed. We can relate to each other in all areas of life with people in other countries without the need to meet, this is made possible by the rapid advances in technology which is commonly known as globalization.

People can interact across national borders easily and cheaply. In the business world, technological advances make business transactions can be done digitally which is commonly called e-commerce.

In the digital system, various transactions are carried out by various parties, the transactions carried out can be B2B, B2C, C2C, and C2B. Everyone with internet access can make these transactions easily, this is technological advancement in the business world.

In Indonesia in September 2017, there were 133 million active internet users and 115 million of them were active social media users. In 2015, the number of electronic transactions ( e-commerce ) in Indonesia reached US$1.7 billion or 1.2% of Indonesia’s total retail sales.

Technological developments in Indonesia are driving the growth of this e-commerce market and according to an analysis from Nielsen, the Indonesian e-commerce market will reach US$46 billion or 52% of the total e-commerce market of the 6 largest countries in ASEAN.

In view of this condition, the government should see technological advances and the rapid growth of the e-commerce market as an opportunity to increase tax revenue. Indeed, collecting taxes in the technology industry is not easy for several reasons.

First, the industry is fast-moving and intangible. This makes it difficult to collect taxes on this industry. Because the Indonesian tax law requires that a business can be taxed if it has a physical form in Indonesia, this does not apply to the digital world that can conduct transactions without having a physical form in a country.

Second , this industry is anonymous which makes it difficult to identify transaction actors. This makes it difficult for tax officials to find taxes on a transaction. Third, tax regulations in Indonesia still have loopholes for tax evasion. Such as the Indonesian tax rules that require a physical form or BUT in Indonesia.

Therefore, the government should make a new breakthrough so that this industry can be taxed because this is about justice. Because if the conventional industry has to pay taxes, the digital industry must also be taxed because they get economic benefits from their activities in Indonesia.

Ultimate Solution

TO increase tax revenue, the government can impose a tax rate of 1% of turnover for online sellers according to PP 46/2013 provided that the turnover is less than 4.8 billion a year and not the services of notaries, doctors, architects, lawyers, and other intermediary services.

However, this solution is not the main problem. To solve the main problem in taxing the digital world, the government must create a new tax instrument to accommodate this technological advancement. Because if you don’t have a clear tax instrument, it will be difficult to collect taxes from this industry.

As a reference in applying tax instruments to the technology industry or commonly called e-commerce , the Indonesian government can learn from several countries that are quite successful in collecting taxes from these business people.

Countries that can be used as a reference such as the UK which uses the term Google Tax , India with the term Equalization Tax, or Australia. In making this new instrument, it also requires information about tax treaties so that the right to collect taxes can be compromised between countries and so that business people do not pay taxes twice.

Transactions that can be imposed such as distribution of advertising commissions, B2B transactions, buying and selling applications, and various digital transactions that are basically invisible and the perpetrators as additional recipients of economic benefits do not have a physical form (BUT) in Indonesia.

Compliance Monitoring

THEN to be able to increase tax revenue, we can use technology in this case social media to monitor one’s tax compliance. This is like what was done in India and in Indonesia when someone mentioned the DGT’s Twitter account because an artist owns a luxury car.

If the public takes an active role in supervising one’s tax compliance by monitoring their social media, it is expected that tax revenues will also increase. Other things that the government has done to take advantage of technology are such as e-filling and access to online tax matters.

Then recently an online transportation application (Go-Jek) was appointed as a tax agent, this made it easier for taxpayers to submit annual tax returns and for NPWP registration, this shows that technology can help and be used to increase state revenues.

As a large country, Indonesia should be able to encourage technological progress that can encourage economic growth. Technological advances should be able to encourage increased tax revenues instead of becoming an obstacle.

Therefore, the need for a tax instrument that is able to accommodate the need to collect taxes should be a priority for the government as a tax regulator. Because this is about fairness in the eyes of taxes.

If conventional business people are subject to taxes, so will digital or e-commerce business people. So, let’s make technological advancements an opportunity to increase tax revenue in various ways, especially what we can do, such as monitoring taxpayers’ tax compliance.*

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