Tax Competition Gets Tighter, MEA Risks Exacerbating the Intensity of Competition.
The government plans to expand, simplify, and extend the implementation of the “tox holiday” policy to encourage investment for up to 20 years. This policy risks triggering a tax discount war (tox competition) with neighboring countries so as to trigger a "race to the bottom", especially after the implementation of the ASEAN Economic Community (AEC) later this year.
In regional areas whose economies are increasingly integrated, such as the European Union and especially Africa, the phenomenon of "roce to the bottom" occurs. The "tax war" risks putting every country in a lose-lose situation, light taxes will result in the loss of potential state revenues. For Indonesia, the target of achieving the tax ratio of 16 percent according to the Nawacita is in danger of not being achieved. What is really needed is coordination and agreement between ASEAN countries, so as not to make the tax instrument as low as possible to invite investors.
Important point :
- Excessive tax incentives have the potential to trigger a "tax discount war" between neighboring countries.
- The integration of the ASEAN Economic Community (AEC) risks pushing race to the bottom as in the European Union and especially Africa.
- An agreement between ASEAN countries is needed so as not to reduce taxes as low as possible to the detriment of all member countries.
