In the last few decades, digitalization in the business sector has been able to change the landscape of companies doing their business. Now, in the era of the digital economy, companies can run their business outside their home country without having to build a physical office. This has implications for tax policy and administration. The issue that gets the most attention is whether international income tax rules are still relevant where intangible assets have caused physical existence to lose relevance.
On 19–20 November 2019 in Manila, the Philippines a 'Regional Meeting on Tax and Digitalization for Asia and Pacific Countries' took place to discuss tax challenges in the digital economy era. In this activity, PRAKARSA represented by Cut Nurul Aidha (Research and Knowledge Manager) and Rahmanda Muhammad Thaariq (Researcher) were given the opportunity to provide input regarding the OECD unified approach proposal on pillar 1 and pillar 2. This meeting was a limited meeting attended by representatives of countries throughout the Asia Pacific and several CSOs (civil society organisations). PRAKARSA being the only CSO originating from Indonesia.
PRAKARSA provide input that it is necessary to define a more detailed scope. Therefore, it can include technology companies based on on demand services that are not specifically in one line of business, which makes taxation difficult. Furthermore, a clear threshold is needed in which companies with what business value qualify as tax object categories. Finally, data collection needs to be clarified because for countries that are still struggling with data (such as Indonesia) it will be very difficult to tax technology companies.
