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Abstract
1. Introduction
The results of Google-Temasek-Bain (2019) research which recorded a
combination of electronic commerce (e-commerce) Gross Merchandise Value
(GMV) transactions with Online Travel, Online Media, and Ride Hailling in
Indonesia have reached USD 40 billion (and the value of these transactions
estimated to continue to increase to USD 133 billion in 2025) shows that e-
commerce can potentially be one of the drivers of the domestic economy, contribute
to increasing Indonesia's gross domestic product (GDP), can bring greater socio-
economic impacts and encourage inclusive economic growth [1].
However, high hopes for the benefits of e-commerce remain constrained by the
many challenges and interconnected complexities that must be faced by the
government, especially the tax authorities. The most difficult challenge related to
compliance tendencies with taxpayers, including e-commerce actors, will be to
consider the most beneficial actions among the available choices (rational action),
including the choice of incentives to break the rules or break an agreement rather
than having to obey a certain law [2]. The challenge of tax compliance is certainly
not spared from the efforts of certain parties who carry out complex e-commerce
transactions that involve cross-border in several countries. Lee and Hwangbo
illustrate this with purchases made from country A where the seller is in country C
by using a cyber shop or platform that could be in country A or country B or country
C, and then the goods will be sent through a warehouse that could be in country A
or country B or country C [3]. The challenges and complexity resulting from e-
commerce and the like cause tax avoidance and tax evasion on a global scale, as the
Organization for Economic Co-operation and Development (OECD) indicates a loss
in the scope of base erosion profit shifting (BEPS) of around 4% - 10% from global
corporate income tax receipts, or around USD $ 100 - $ 240 billion annually [4], and
the fact that tax reporting for the e-commerce transaction in Indonesia which has
reached USD 40 billion has not yet been obtained, given the study conducted by
Sari on 1,600 e-commerce actors found that a total of 600 e-commerce actors were
apparently not identified. Then, of the 1,000 e-commerce actors identified, only
62% already have a Taxpayer Identification Number (NPWP), and of e-commerce
players who already have the NPWP, only 50% have reported Tax Returns (SPT),
where the report has not been known the truth of the reporting [5]. This has always
been a common problem given that one of the characteristics of the internet, which
is a popular trade route today, is the inability of the tax authorities to be able to
centrally control the sale and purchase of goods and services on the int ernet. As in
Indonesia, even though there are regulations on trade and about trading through
electronic systems, there are always e-commerce transactions that are never taxed
due to some common problems, such as companies that can run their websites in tax
heaven countries, lack of agreement on tax liability calls for e-commerce
transactions, no special tax treatment in e-commerce transactions, and no technical
rules for determining which customer posts can be checked [6].
Given the need for tax authorities in Indonesia, which is the Directorate General
of Taxes (DGT), to be able to maximize benefits and minimize adverse
consequences in terms of the rise of e-commerce transactions, this research seeks to
address two main problems. First, how are the consumer’s location rules in the e-
commerce tax regulations currently in effect in Indonesia? Second, how is the e-
commerce tax arrangement based on the principle of public benefit in Indonesia for
the consumer's location?
2. Literature Review
The complexity of micro and macro economics, organizing and administering e-
commerce [9] has triggered loophole and efforts to avoid tax liabilities from certain
parties involved in e-commerce transactions because they are considered as a factor
to increase the price of goods/services [10], as several studies have reviewed.
Viboonthanakul revealed that e-commerce and commerce on the internet caused
smuggling problems which caused the government to lose revenue from several
commodities, such as cigarettes, household appliances, textiles, clothing, footwear
and leather goods, books, and stationery [11]. Selinsek revealed that smuggling,
which is generally a movement of goods across national borders by avoiding the
supervision of customs officers, and or using certain company facilities, certain
groups, or through coercion accompanied by certain threats, is one form of tax
evasion [12]. Yapar, Bayrakdar, and Yapar found that e-commerce allows
businesses to earn their income without a physical presence, where many state
taxation policies by region and jurisdiction begin to fail after improving e-
commerce, then concepts such as permanent establishment, sales location, and
classification the products, and income used in the taxation process remain
inadequate, and the model of determining the location of sellers and consumers in
transactions on the internet is rather difficult. The implications of e-commerce have
caused the tax administration to barely get clear information about the amount of tax
that has been collected from e-commerce transactions [13].
the collection does not exceed tax revenue, and the OECD's idea of efficiency and
flexibility contributes to handling e-commerce tax challenges. The efficiency
principle stated by the OECD is related to tax compliance and administration costs
must be minimized by the tax authority, while the principle of flexibility is related
to the taxation system which must be flexible and dynamic while keeping abreast of
technological and trade developments [21].
3. Method
This research is library research with its constituent components in the form of
normative components and other moral and substantive considerations which are
interrelated and produce coherence in many aspects [7], such as law, economics, and
technology.
In order for this research to find as much information as possible in answering
existing problems, three levels of bibliographic sources are used, each of which has
a different role in research or writing, namely tertiary, secondary and primary
sources. Tertiary bibliographic sources provide a review of the most common and
non-technical topics, for example almost all textbooks and articles in popular
newspapers or magazines, dictionaries, and encyclopedias. Secondary bibliographic
sources are between tertiary and primary sources, where secondary sources are
deeper than textbooks or other tertiary sources. In general, secondary sources are
comprehensive reviews written by an expert on the topic, such as book reviews and
literature. The primary bibliographic source is the original research report which can
be found in a research journal. It is the research article that represents the greatest
level of focus and detail from all bibliographic sources. The advantage of
multiplying this main source is due to the need not to filter information anymore,
because the main source is considered to have provided a detailed description of the
research method, data analysis, and complete research results [8].
customers, business partners, and vendors, for example, suppliers who interact with
producers, customers who interact with sales representatives, and shipping providers who
interact with distributors (without including operations handled in the business itself, for
example, production, development, company infrastructure, and product management
because it is an e-business scope) [25]. Whereas the definitions in the context of law in
Indonesia are formulated in Article 1 number (2) of Government Regulation (PP) of the
Republic of Indonesia (RI) Number 80 of 2019 concerning Trade through Electronic
Systems, which defines Trade Through Electronic Systems (PMSE) as Trade whose
transactions are carried out through a series of electronic devices and procedures. As for
business actors in e-commerce consisting of Domestic Business Actors (including
Traders, PPMSE, and Domestic Intermediary Facility Providers) and Overseas Business
Actors (including foreign Traders, PPMSE, and International Intermediary Facility
Providers) (Article 5 PP No. 80 of 2019).
The existence of several definitions of e-commerce is apparently not so easily
translated into trading practice. For domestic transactions (in Indonesia), for example,
many companies currently have outlets and carry the concept of one-stop shopping, and
offer their products through the company's website, at least in the form of 5 (five)
patterns. First, there is a direct payment and sale transaction between the buyer and seller
at the store or sales shop. Second, there is a cash on delivery (COD) transaction, where
consumers order goods online and pay for goods when the goods have been received by
consumers. Third, consumers order goods online, and then these consumers come to
supermarkets to pay and take goods. Fourth, consumers order goods online, then pay for
them by transfer, and then the consumer comes to the supermarket to pick up the goods.
Five, consumers order goods online, pay for transfers, and companies send goods to
customer locations. Of course, if what happens is the first and fifth forms of buying and
selling will be confirmed that the transaction is conventional trading and e-commerce.
Whereas the second, third, and fourth patterns are still relatively difficult to identify and
give rise to various interpretations in terms of their categorization of conventional
commerce or e-commerce.
In addition to trade patterns in practice, policies relating to e-commerce tax collection
in Indonesia have actually been prepared in Minister of Finance Regulation (PMK)
Number 210 of 2018 concerning Tax Treatment of Trade Transactions through Electronic
Systems (e-commerce), but regulations It was revoked before it took effect on April 1,
2019, because it gave rise to pros and cons. In Article 3 paragraph (1) PMK No. 210 of
2018 regulates that e-commerce of goods and/or services in the Customs Area can be
done through Marketplace Platforms or Platforms other than Marketplace that can be
online retail, classified ads, daily deals, or social media. What is meant by marketplace
platforms are Parties, whether individuals, entities, or Permanent Establishments (BUT)
who reside or are domiciled or have business activities within the Customs Area that
provide platforms in the form of Marketplace, including Over the Top in the field of
transportation within Customs Area (Article 1 number 15 PMK No. 210 of 2018). Then,
Article 3 paragraph (2) of the PMK outlines 4 (four) ways of e-commerce of goods and/or
services through the Marketplace Platform in Indonesia, namely: (1) Marketplace
Platform Providers provide e-commerce services for goods and/or services ; (2) Traders
or Service Providers use Platform facilities provided by Marketplace Platform Providers
to conduct e-commerce; (3) Buyers of goods or service recipients make purchases of
goods and/or services through Marketplace Platform Providers, and (4) Payment for trade
in goods and services through e-commerce by buyers to Traders or Service Providers is
done through Marketplace Platform Providers.
The existence of patterns in practices and ways in e-commerce in Indonesia also still
raises e-commerce transaction derivatives, for example, the company uses several social
networking sites to promote its products so as to bring up promotional services called
issue of justice that wants equality of tax treatment is contrary to the principle of
expediency desired by Mill which has asserted that although justice has the highest
position among the existing moral pool, justice should give way to other moral principles,
such as the principle of expediency, which turns out to have an urgency to fulfill
obligations to the public at large. For example, if there is an equal tax treatment between
conventional trade and e-commerce, while e-commerce investment is very loaded with
the latest technology which is very expensive and the value of benefits is very fast, it is
feared that taxpayers in the e-commerce field will make efforts certain efforts that change
the form of business from one form to another as long as it provides benefits in the form
of smaller tax payments [28]. Conversely, if the tax authority adopts a "service and client"
approach as a means of trusting, taxpayers in the e-commerce field will voluntarily
comply with their tax payments, because the efforts made are beneficial in streamlining
costs, both for the state and taxpayers, such as minimize the costs that must come out in
the event of a tax audit that in the case of an already very high level of compliance should
not need to be done again [29].
4.3. E-Commerce Tax Arrangements that Use the Public in Indonesia against
Consumer’s Location
Considering that currently there are no specific provisions regarding e-commerce
taxation in Indonesia and the tax law should be able to be a tool to manipulate e-
commerce communities that tend to always transform, it is necessary to understand e-
commerce tax arrangements that are publicly advantageous based on pro and contra
arguments against e-commerce tax and consumer's location. Chou put forward an
argument supporting the imposition of e-commerce tax based on the following points: 1)
every profit or transaction resulting from every sale, including e-commerce, must be
taxed; 2) taxation for e-commerce regarding adjustments to internet usage that is in the
public domain and is open to all; 3) e-commerce tax can support the development of
internet technology; and 4) the imposition of e-commerce tax does not only increase state
tax revenue, it is also due to neutrality and horizontal equity considerations [6]. Then, the
arguments against the imposition of e-commerce tax raised by Chou and Jin related to the
following matters: 1) the imposition of e-commerce tax will hamper the expansion,
growth, and efficiency of e-commerce in the future; 2) the difficulty of tracking sales
transactions on the Internet, such as the ease of downloading software, email addresses
that can be made in large quantities, payments can be made by credit cards or electronic
money or transfers that can use foreign banks or offshore banking; 3) applicable e-
commerce legislation is unclear; 4) the current complicated multistage tax structure and
system, especially due to interstate vendors; and 5) as the government's full support for
the growth of internet technology [6, 30].
Then, in terms of consumer’s location, Lee and Hwangbo summarize 6 (six) important
principles in identifying the jurisdiction of a country. First, in the case of the location of
the consumer's residence, the consumer must report the address of the residence to the
merchant so that the merchant's software must have a trigger in the jurisdiction of the
country where the consumer software is located, and the merchant requires a consumer
certificate as authentication. Second, in the case of the location of the order, the consumer
must report the location of the order so that the merchant can identify the country of the
customer, and the merchant needs extra work to confirm the location of the order based
on the IP address. Third, in the case of delivery locations, the consumer must report the
delivery location. Of course, this process does not require extra effort, but the delivery
point may not be to the country of the consumer but to other countries whose treatment
can apply as a gift to the recipient. Fourth, in terms of the location of actual consumption,
there will be difficulties in confirming the location of actual consumption, and it is almost
impossible to implement. Fifth, in terms of payment, this will only cause ambiguity to
people of Indonesia as possible. One of them is the existence of an article in the regulation
that requires traders or service providers to notify the NPWP to the platform. If you do not
yet have an NPWP, then the merchant needs to obtain an NPWP via e-commerce or
provide the Population Identification Number (NIK) to the platform. Obviously the
fulfillment of these requirements is simpler and easily accepted by e-commerce actors so
that the database obtained based on NPWP and NIK can be empowered on 6 (six)
consumer’s location principles proposed by Lee and Hwangbo.
This simplification of requirements greatly strengthens existing marketplace platform
companies in Indonesia or overseas platforms (but has a market base in Indonesia) and
wants to comply with tax regulations in Indonesia to escape the fear of massive migration
of marketplace platform users to site products social networks like Facebook, Twitter, and
Instagram. Because if e-commerce transactions are carried out through social networking
sites like Facebook, Twitter, and Instagram, then buying and selling transactions via the
internet will be difficult to detect even though the DGT has the ability to request national
banking data information, but various ways to do tax avoidance can still be done, for
example, payment transactions through offshore banking or credit cards or foreign
account transfers or bank receipts or bank payments made not through the accounts of the
parties to the transaction. Then, the simplification of these requirements can be followed
by the simplification of taxation in the e-commerce environment, the proposal of which
can take into account the ideas put forward by Lee and Hwangbo in order to use the
characteristics of value-added tax directly deposited by consumers in Indonesia without
supplier intervention [3]. The mechanism can be done through building an online tax
payment system application whose notification is immediately known to the seller of
goods and or e-commerce platforms. Of course, this mechanism can spur
consumers/buyers to submit applications to become taxable entrepreneurs voluntarily in
order to be able to credit their input taxes.
Furthermore, by simplifying the requirements of the perpetrators of e-commerce
transactions, the regulation of e-commerce tax treatment based on the consumer's location
can be done with the principle of clarity of purpose as formulated in Article 5 letter an of
Law No. 12 of 2011 concerning Formation of Laws and Regulations, namely the
achievement of the goal of establishing laws and regulations in the field of e-commerce in
the form of the emergence of costs that become cheaper when calculated with the
potential benefits obtained by the actors of e-commerce and at the same time the potential
tax revenue received by the state to be bigger than what is lost in the e-commerce sector.
5. Conclusion
This research produces two main conclusions. First, e-commerce tax regulations
as the lex specialist of the Government Regulation No. 80 of 2019 do not currently
exist in Indonesia, so legal certainty in determining tax potential based on
consumer’s location cannot be done by the DGT. Second, e-commerce tax
arrangements based on the principle of public benefit in Indonesia for consumer's
location must be done through arrangements that strengthen voluntary compliance
while at the same time spurring the orderly, orderly expansion and growth of e-
commerce. The regulation must explicitly regulate the simplification of the
requirements for actors in e-commerce, the simplification of tax imposition and
payment by consumers, and the simplification of information systems and
technology in the case of e-commerce transactions of taxpayers. The principle of
expediency in regulating e-commerce tax must be applied so that people do not
conduct e-commerce transactions through social networking sites which would
actually make it difficult for the DGT to track its data to social networks that are
based in the United States given the limitations of technology and information
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