| Host | Korea TC |
| Date | 13-15 November 2023 |
| Time | |
| Type | In-person |
| Venue | Bali, Indonesia |
| Attendees | tax officials and policy makers of the Directorate General of Taxes of the Indonesia Ministry of Finance |
Main Contents
| The OECD Korea Policy Centre’s Tax Programme hosted Knowledge Exchange Training Programme (KETP) for the Indonesian Ministry of Finance’s Directorate General of Taxation in Bali, Indonesia, from 13 to 15 November 2023. The workshop covered a topic of ‘Preventing Tax Avoidance’ and presented policy concepts, recent issues and policy suggestions for the Indonesian tax authority. The workshop was attended by 20 Indonesian tax officials. Juan Carlos Pérez-Peña from the OECD, Professor Yoon Oh (Hanyang University), and Professor Junseok Oh (Sookmyung Women’s University) were the speakers who led each session. On the first day of the event, Mr. Juan Carlos Pérez-Peña explained the main concepts of Action 2, 4, and 12 of the Base Erosion and Profit Shifting (BEPS) project. Action 2 of BEPS is on eliminating hybrid mismatches, and he explained the concept of hybrid mismatches, caused by inconsistent tax systems and laws among countries, allowing companies to exploit these inconsistencies for tax avoidance. The session continued with an introduction to BEPS Action 3. It was explained that Action 3 is a solution to the problem of avoiding taxation of earnings of certain foreign entities by long-term retention of foreign subsidiary income instead of distributing it to the home country. He explained that BEPS Action 3 suggested how to effectively design the Controlled Foreign Company (CFC) Rules. It defines the income that is subject to the rules, the level of regulation and which company to be subjected. He accounted that a minimum legal control and economic control threshold was recommended. He then continued with an explanation of BEPS Article 4. He explained that BEPS Action 4 limits excessive deductions from interest and other financial expenses. He explained that multinational entities can either deduct interest payments as an expense in a high-tax country, or they can take out loans within the corporation. He added that they are the easiest way to shift income. He highlighted that BEPS Action 4 takes into account the net deductibility of interest within a jurisdiction and economic activity within the jurisdiction. Also it recommends designing domestic legislation to implement BEPS Article 4. On the second day of the event, Juan Carlos Pérez-Peña explained BEPS Article 12. Professor Junseok Oh stated the trends in the General Anti-Avoidance rules (GAAR) and tax strategies for corporate tax savings. He explained that tax avoidance is the manipulation of factors to gain a tax advantage which is not against the laws in appearance. He added that General Anti-Avoidance rules (GAAR) authorizes authorities to deny tax benefits to transactions or arrangements that have no commercial substance and are solely intended to obtain tax benefits. He described the difference in General Anti-Avoidance rules (GAAR) in US and the UK. He explained the global trend of general anti-avoidance rules. He explained that Anti-Avoidance Rules (AARs) closely examine the substance of transactions and agreements and allow tax authorities to deny tax preferences if they are falsified or artificially embellished. They generally ensure that tax preferences are used as intended and give tax authorities more power to do so. Next, Professor Oh explained the General Anti-Avoidance Rules(GAARs) and the Principal Purpose Test (PPT Rules). He explained about the Anti-Avoidance Rules (AARs) and the features of General Anti-Avoidance rules (GAARs) and Specific Anti-Avoidance Rules (SAARs). He then explained the Principal Purpose Test Rules (PPT Rules), which can be used as a standard when designing GAAR rules. It means that denying tax benefits where the main purpose of the transaction is the abuse of a tax treaty. He also mentioned the Reasonable test, and explained that it is possible to apply both approaches. Concerning situations in Indonesia, he explained that Indonesia does not have a specific GAAR, it has a system of statute law and cannot be judged by case law. Also he added that there is a provision in Indonesian law that treaties take precedence over domestic law, so these circumstances must be taken into account when enacting a GAAR. During the event, the experts delivered in-depth lectures and the participants participated enthusiastically in the lectures. Focusing on the agenda of ‘Preventing Anti-Tax Avoidance’, the relevant provisions of the BEPS project were introduced, and the situations that need to be considered in legislation were covered through theoretical explanations and examples. The discussions were related to Indonesia’s tax laws and the latest trends, enabling the participants to acquire practical knowledge that can be used in drafting and other practices. |
