Indonesia plans to implement the world's lowest tax regime

The Indonesian government plans to immediately implement the Global Minimum Tax System GMT, a concept developed by the Organization for Economic Cooperation and Development (OECD) with a minimum effective tax rate of 15%.The Deputy Minister of Finance said that the implementation of the global minimum tax rate in Indonesia could increase state revenue by Rp 3.8 trillion to Rp 8.8 trillion. The implementation of the global minimum tax rate is very important considering the rapid development of technology and digitalization. This development has caused national borders to become increasingly blurred, so that many multinational corporations operate in multiple countries without the physical presence of a company. This condition means that the traditional tax system applied to date is unable to tax these businesses, and in fact multinationals, which are usually engaged in the technology sector, make substantial profits from the countries in which they operate. The result is an imbalance between the profits they earn and where they are taxed, which puts some countries, particularly developing countries, at a disadvantage. Many countries are unable to obtain tax entitlements from companies in developed countries, and this imbalance ultimately exacerbates global economic inequality.

The traditional tax framework could not cope with those challenges, and the Government therefore planned to promote the speedy implementation of the global minimum tax, a tax system that could overcome the challenges posed by globalization and digitalization. This new pattern requires an overhaul of domestic policies to align with global standards and remain competitive. Quoting the World Economic Forum, the GMT aims to end the practice of multinational corporations shifting their profits to low-tax countries and territories, even though the income is generated elsewhere. Countries previously used as tax havens, including Ireland, Luxembourg, Switzerland and Barbados, are now implementing such minimum tax rates, including more than 140 countries that have committed to new global tax treaties aimed at making multinationals pay the minimum tax rate.