Digital Service Tax: Lessons Learned

Abstract

The rapid development of technology and globalization has provided significant business opportunities for digital companies. Digitization has led to changes in traditional structures, where businesses typically have a physical presence and are taxed in jurisdictions where businesses have a real presence. Several countries have made and established regulations on the tax treatment of trade transactions through digital systems. However, there are still pros and cons among the countries concerned. This study uses a qualitative approach to analyze the development of Digital Services Tax regulations in several European countries, including the earliest to make regulations on digital services taxes. The development of regulations in these countries is expected to be a reference for the application of digital services tax in Indonesia. The analysis results show the need for a Digital Service Tax (DST) to be imposed on entities that provide digital services on a specific basis, other than in the form of VAT. DST must consider the applicable international taxation regulations to avoid double taxation. Appropriate strategies and steps are needed to improve voluntary tax compliance. Finally, the government should set a provisional rate for digital taxes in Indonesia until a global consensus is reached.