12 May 2017
Wind of Change
“I follow the Moskva
Down to Gorky Park
Listening to the wind of change”
It is initial part of the ballad song by Scorpions, a rock band from Germany. The song was composed and written by Klause Meine (vocalist) became a worldwide hit just after the failed coup that would eventually lead to the collapse of the Soviet Communist regime. In relation with tax regime, I believe that the Indonesia taxation also will have ‘wind of change’. Parties that related with taxation practice should consider and adapt with the current situations.
Group of countries committed to do the exchange of information globally. Transfer Pricing is the main issue for most of the countries. Internet era create new lines of business with potential high growth. E-commerce, business via internet, drones technology, and automatic driving car are among others the line of businesses and products that will change the world significantly. Business transactions will be borderless and physical market will become lesser.
Indonesia that applies worldwide income should change to source of Income Principle in order to have the right to tax on income earned via internet business from Indonesia. Google Case is a good example for this where the source of Income principle is needed to clarify that income earned from Indonesia is subject to tax in Indonesia, wherever IP address is located. Indonesia is a sweet market with fourth biggest population. In our future tax laws, government needs to have a strong base to tax Income earned from Indonesia in the internet business like this.
What should tax payers do to adapt the wind of change in taxation?
After tax amnesty, tax payers are expected to change their practice by applying preventive than curative approach. Action steps in preventive approach for this year, at least should cover:
a. Preparing the Transfer Pricing Documentations i.e. Master File, Local File and CBCR for affiliated transactions. By doing this, it will stay away from 50% sanction if any tax audit adjustments.
b. Maintaining a good and valid records that supported by sufficient documentation especially for individual tax payer. Tax office will use the data and information from many payable and free sources. Properly reporting system is recommended in order to enhance tax compliances.
c. By new tax rulings, the tax auditors has the right to invite the Board of Directors to meet them, at least for the initial meeting. Tax Consultants can accompany at the initial meeting but do not expect too much even the BOD has provided Power of Attorney. They could not come alone. Attending the initial meeting by a member of BOD will give a good impression and cooperation.
The wind of change is not only happened in Russia but also in Indonesia taxation sector for tax authorities and tax payers.
“Take me to the magic of the moment
On a glory night”
Agung Tjahjady SH, CPA, MM, BKP
Registered Tax Consultant, Advocate
0816 825 348
BVD Oriana User