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Indonesia is at risk of losing potential income tax revenue from global digital companies such as Google due to delays in the implementation of the OECD/G20 Pillar 1 framework, which reallocates taxing rights for multinational companies with worldwide revenues above €20 billion. Pillar 1 aims to allow countries where consumers use digital services to receive a portion of profits, giving developing economies like Indonesia a new source of tax revenue.
The Directorate General of Taxes (DGT) has warned that discussions on Pillar 1 may stall without international consensus, limiting Indonesia’s ability to collect taxes on digital services sold within the country. The OECD released the Multilateral Convention draft in October 2023, but it still requires approval from participating nations. Indonesian officials remain hopeful, but the window for global adoption appears narrow.
This development is particularly significant as Indonesia has historically struggled to tax digital platforms operating across borders, leaving substantial revenue untapped. The potential loss of Pillar 1 implementation could affect budget planning and digital sector regulation.
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