More than 60% of the world trade value is generated from the transactions related to the multi-national companies using transfer pricing schemes, namely by diverting corporate profits from countries with high tax rates to countries with low tax rates. Recently, even transfer pricing allegedly has become a strategy for the company in avoiding tax payment obligations related to buying and selling transactions. Most recently, KPK-Indonesia anti-corruption body is targeting 51 coal mining companies to open sales contract data for the 2017-2019 period.
Considering the importance of understanding the transfer pricing, PWYP Indonesia in collaboration with Danny Darussalam Taxation Center (DDTC) conducted a training entitled “Understanding Transfer Pricing for Civil Society” as part of the PWYP Resource Center activity, last (30/7). The training that held at DDTC center explained about tax planning, tax avoidance, and tax evasion, international tax condition, the latest update from transparency, fundamentals of transfer pricing, case studies, and how transfer pricing applied in Indonesia.
Bawono Kristiaji, partner of tax research and training services at DDTC which become speaker in the workshop was explained about the concept of the global agreement, effort in preventing transfer pricing manipulation which done by implementing the principle of fairness and Arm’s Length Principle which must be proven through documentation of transfer pricing.
Both of them, fairness principle or transfer pricing documentation, has regulated in the tax provision in Indonesia. Not only that, through Base Erosion and Profit Shifting (BEPS), OECD and G20 have proposed the new documentation format of Transfer Pricing (Action 13) which consists of 3 documents, that are a local file, master file, and Country by Country Reporting (CbCR). The local record indicates a transaction that has been done by the taxpayer. The master file gives a business illustration about the business group while Country by Country Reporting provides data on tax finance for all members of the company group in each country.
Ferdian Yazid, Program Officer at Transparency International Indonesia, one of workshop participant, conveyed that civil society needs to understand the transfer pricing more comprehensive. Companies’ motive related to transfer pricing is a lot, so it needs to be studied more deeply.
Besides, Ferdian also commented about Country by Country Report (CbCR) that currently only can be accessed by the tax authority. He hopes, CbCR also can be accessed by the public so civil society can participate in assessing whether the transfer pricing is reasonable or not.
Ambarari Dwi Cahyani, one of PWYP Indonesia Board, who was also the participant in the training, emphasized that the challenges ahead will be even more significant. On the one hand, civil society’s understanding is still weak, while the inter-state system is dynamic and continually changing. Thus, civil society needs to leverage its capacity, to continue in promoting good governance in taxation from a multi-national company.
Besides, it needs to be concerned that the result of the tax court is not open to the public yet. Going forward, civil society needs to encourage tax court decisions to be made public, so that later discourse appears to enrich public understanding and study of tax disputes.