Abstract
A growing debate on the imposition of digital services tax emerged as one of the latest trade war battlegrounds. Indonesia and the European Union (EU) are among the countries that have taken unilateral actions to implement digital services tax. This paper examines (i) digital services tax regulation in Indonesia and the EU and (ii) whether the digital services tax regulation violates the non-discrimination principles of WTO according to the GATS. By comparing the statutory and practice of digital services tax in Indonesia and the EU, this work concludes that firstly, digital services tax in Indonesia is regulated by law, which implements significant economic presence (SEP) criteria. In the EU, digital services tax is regulated through the Council Directives and implements ring-fencing method as well as SEP criteria. Secondly, the non-discrimination principles in the GATS are promulgated in Article II concerning Most-Favored Nation Treatment and Article XVII concerning National Treatment as well as relevant jurisprudence of WTO case laws. Indonesia and the EU’s digital services tax regulation are not discriminatory, because based on existing indicators, the existence of both de jure and de facto discrimination is not proven. This paper suggests that in the event that there are member states who decide to challenge the measures to the WTO, Indonesia and the EU should provide evidence that shows the absence of unfavorable treatment of certain WTO member states in digital services tax practices by Indonesia and the EU.
Highlights
This paper suggests that in the event that there are member states who decide to challenge the measures to the WTO, Indonesia and the European Union (EU) should provide evidence that shows the absence of unfavorable treatment of certain WTO member states in digital services tax practices by Indonesia and the EU
The data obtained will be analyzed by qualitative methods to determine whether the implementation of PTE in Indonesia and DST in the EU violate the non-discrimination obligations of WTO member states
The two sections of this paper will focus respectively on the implementation of Indonesian and European Digital Services Tax. It will be followed by an explanation of the Non-Discriminative Principles of WTO, which serves as a basis for the following analysis of the compliance of Indonesia’s and EU’s digital services tax to the Non-Discrimination Principles of WTO
Summary
Trade in digital goods and services via the internet is growing rapidly. The Cisco Annual Internet Report for 2020 reveals that approximately 12% of global merchandise trade is conducted via the internet. Based on the press release of the United Nations Conference on Trade and Development published in 2020, the estimated value of global e-commerce sales is $ 25.6 trillion in 2018, valued at 30% of the world’s Gross Domestic Product (GDP) in that year. Despite making a significant contribution to the global economy,. Elisabet & Dewi the digital economy is a major challenge to international trade, in the implementation of taxes on services.3 This is due to the defiance to the traditional principles of international tax law which require a permanent establishment or physical presence to tax the company’s income or profits from the sale of the country.. USTR proposed to the United States parliament to impose trade restrictions and tariffs as an act of retaliation or retaliation, namely in the form of an increase in import duty rates of up to 100% on imported luxury goods from France.18 This allegation of discrimination underlies the selection of the EU digital services tax arrangement to be compared with the Indonesian arrangement in this study. The findings of this work will be presented in Conclusion
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