Friday, August 28, 2015

Something not certain in life, the story about international tax avoidance

We may have heard that there are two things certain in our life, namely death and tax but what if I tell you tax is not always certain in some fortunate circumstances as it has been enjoyed by some multinational companies as well as some wealthy people. 

The story is how we may see on how international tax avoidance could be legally done and cause double non taxation. It may sounds too good to be true, but the story below is definitely not a story from utopia land.

Death and Taxes
What are certain things in life? Benjamin Franklin, a former US President said in his letter, that "The only things certain in life are death and taxes,” and “in this world nothing can be said to be certain, except death and taxes.” His remarks are quite well known as it is used many times, for instance in this publication.

People still dream of a land or a country without tax, where people could live their joyful life and not paying tax or pay as low as they can be. The rich will become richer and could please themselves with the money they have. It may refer to the so-called tax haven or low tax jurisdiction where no tax or very low tax has to be paid. There are different definition for tax haven and it could be found in many countries which may also serve as financial offshore center.

OECD surveys shows that the happiest people on earth live in high tax country not in low tax country, it is supported by the fact that the tax money is used to support welfare system including healthcare, free education, infrastructures, public service etc.

But the question is, is it really true that tax is always certain in our life?
There is even a joke saying that death and taxes may be certain, but we don't have to die every year.

Tax Avoidance
Let me share a story about Starbucks, a well-known coffee brand famous worldwide.

Let us see what the famous companies, as multinational companies has done in the last decade.

Starbucks in the UK did not pay tax for many years, the reason is they suffer losses

Amazon sold lots of books in the UK as part of the company’s operation in Europe but the company could pay no tax in UK. Tax in here refers to both income tax and value added tax (VAT) or also known as GST.

Perhaps in lower level, Google has managed to pay much lower tax rate, with only

Because of public pressure in the UK, several companies decided to pay the tax to UK government

Story about Amazon and Starbucks
Based on investigation, it is found that Starbucks had made over £3bn in UK sales since 1998 but had paid less than 1% in corporation tax. For many years, Starbucks suffered losses, for 5 consecutive years until 2012 though the management claimed that the business is profitable

Starbucks, for example,had sales of £400m in the UK in 2012, but paid no corporation tax. It transferred some money to a Dutch sister company in royalty payments, bought coffee beans from Switzerland and paid high interest rates to borrow from other parts of the business.

Starbucks has said it isdown to where the company books its profits. Accounts filed for its British, German and French units, which make up 90 percent of European revenues, show a loss of $60 million in 2011, hence very little tax.

The company was also underthe spotlight since 2012. Online retailer Amazon had generated sales of more than £7.6bn in the UK over the past three years until 2012 but had not paid any corporation tax on the profits from those sales.

Amazon employs hundreds of staff in the UK, at several large depots, selling tens of millions of items each year to millions of UK customers. ( )

In 2012, also reportedthat, Britain's biggest online retailer, generated salesof more than £3.3bn in the country last year but paid no corporationtax on any of the profits from that income and it is under investigation by the UK tax authorities despite the fact that It is reported that Amazon sells nearly one in four books sold in Britain

Amazon has a near monopoly of the UK digital book publishing market. According to reliable estimates, it sells nine out of 10 ebooks in the UK.

Amazon in UK operation pays 3% VAT on the sales of eBook to Luxembourg but not to UK Taxauthorities which applies 20% VAT. The price of ebooks in Britain is expected to plummet following a vote in Brussels this week that could cut VAT on them from 20 per cent to zero.

Amazon’s EU base is inLuxembourg and its customers in Britain are treated as buying theirgoods from there, even if they are distributed from a warehouse in Britain. Profit on sales to British shoppers is accounted for as a profit in Luxembourg.

In 2012, it is known that despite generating $18 billion of revenue in Britain from 2006 to 2011, the Internet search giant paid only $16 million in taxes to British authorities or around 0,0056 %.

Google says it does not have a sales presence in Britain and therefore cannot be considered resident for tax purposes, lowering its obligations.

An investigation byReuters has shown that some of the 1,300 people employed by Google UK Ltd are engaged in sales-type work or have titles that suggest involvement in sales and marketing activities, but Google says it hires people with a sales background even if they are not directly involved in selling.

Google has faced fiercecriticism for designating its UK office as primarily a marketingoperation, apparently supporting its European base in Ireland. But a Reuters investigation alleged that Google's employees in the UK were actually responsible for sales and not their colleagues in Ireland.

Google brazenly arguedbefore this committee that its tax arrangements in the UK aredefensible and lawful. It claimed that its advertising sales take place in Ireland, not in the UK.
To avoid UK corporation tax, Google relies on the deeply unconvincing argument that its sales to UK clients take place in Ireland, despite clear evidence that the vast majority of sales activity takes place in the UK.

Apple sells to non-US customers from a base in Ireland, while Google has an Irish business though which the search giant’s UK sales are funneled.

A Mail on Sunday analysisin 2012 found that Apple, Amazon and Google would have paid more than £600million in corporation tax in 2010 if their sales to British customers had gone through a UK company. They actually paid £15million.

Apple Inc.
An investigation by theU.S. Senate showed that the maker of iPads and iPhones had paid just 2 percent tax on income of $74 billion over the past three years, largely by exploiting an unusual loophole in Ireland's tax code.

Apple sells to non-UScustomers from a base in Ireland, while Google has an Irish business though which the search giant’s UK sales are funnelled.

What do the companies do to deal with those issues?
Those companies abovementioned has to face boycott from the customers, name and shaming for the multinationals. Some of them had to deal with the parliament in UK and some of the videos could be seen on how to answer the questions.

Income Tax

Starbucks offered onWednesday to pay about £10 million ($16.05 million) a year incorporate taxes in Britain — or £10 million more than it paid last year. Starbucks said that in 2013 and 2014 it would refrain from claiming certain tax deductions that helped reduce its tax bill to zero in Britain over the last three years.

It seems unfair for domestic companies in the UK while multinational companies could escape income tax.


Tax Avoidance and Tax Evasion
The story is not always a rosy picture of how the companies or even a person could escape the certain thing in life, since Dolce and Gabbana from Italy was foundguilty of tax evasion and the duo has to go to prison for around 1 year 8 months after they transfer their famous brand to a subsidiary company in Luxembourg and accordingly accused for not declaring 1 billion euro of income.

The overall story serves as wake-up call to the government and the public about tax avoidance and its dangers.

People, the ones who tried to escape tax
What about a person? Could someone escape from tax?What about a criminal?
Let’s see the story of a notorious gangster from the US since even criminals have to pay tax

We may have heard the story of Al Capone. A story about a criminal arrested not by the police department or ordinary law enforcement but he was arrested by IRS, US Tax Authority after finding supporting documents and evidence that he did not pay tax on income he received from criminal activities.

Another story is from anyone receiving income from non legal activities or semi illegal activities also need to pay tax, including sex worker or drug dealer which lead to unique idea on how they should calculate their income by using deductible expenses:
a. A drug dealer was arrested in the Netherlands and tax authority alleged that he didnt pay for tax from his drug-dealing business. Because of it, the drug dealer claimed that he could use the purchased drugs as the cost of goods sold and he can use this as deductible expense. Due to this case, Dutch government changed the rule and stated that any expense related to crime could not be used as deductible expense.
b. Funny deductions for odd jobs which have to pay taxes as well
In the country where prostitution is legal, the woman working in that industry still have to pay income tax, and accordingly they claim that plastic surgeryt should be used as deductible expense for income tax calculation

It is the fact that criminal also have to pay the tax

Tax Evasion and US Tax Authority
In 2010, US Tax Authority or IRS has found that there were thousands of US taxpayer hiding their income or their money in Swiss banks and from that time the witchhunting began to find anyone committing tax evasion by the use of foreign offshore bank account.
As a result, like tax avoidance, tax evasion becomes more and more difficult. It is due to more complicated compliance program for the taxpayers.

At the end, could we say that tax is something certain? There are ways to escape or avoid taxes legally, as loopholes, but it is a fact that chances are we have to deal with it and we do have to pay tax.

In the last few years, when we have to prepare our tax returns, we could remember this that tax is certain not only for company but also for any person. At the end, I say that it is true, tax is as certain as death while it is also a fact that some loopholes could be found in any legal system in any country. 

Note :  
-The story above is taken from my speech project for Toastmaster Club 
-The previous article about Base Erosion and Profit Shifting dan pengaruhnya bagi Indonesia has been based on similar issues about tax avoidance and it explained that Indonesia also faces similar issues about BEPS.

Monday, August 10, 2015

Tutorial Belajar Pajak Indonesia

Belajar pajak tidak cuma lewat buku karena sekarang belajar pajak bisa lewat video baik lewat account resmi milik Direktorat Jenderal Pajak (DJP) maupun lewat account non DJP yang sama-sama menjelaskan tentang perpajakan Indonesia.

DJP telah membuat account resmi di youtube yang berisi beraneka rupa program DJP termasuk tutorial atas program pajak seperti e-faktur, e-filing atau e-spt.
Tentunya tutorial akan lebih memudahkan wajib pajak bahkan bagi fiskus untuk memahami penggunaan program pajak secara elektronik

Perhatikan tutorial atas e-filing DJP dibawah ini

Hal ini akan memudahkan tidak hanya bagi Wajib Pajak di Indonesia namun juga Wajib Pajak yang berada di luar negeri, contohnya dari ekspatriat asal Indonesia, TKI hingga mantan Menkeu, ibu Sri Mulyani

Tidak hanya itu, tutorial e-faktur juga sangat membantu karena menjelaskan cara penggunaan aplikasi e-faktur dalam langkah-langkah mulai dari instalasi hingga pembatalan faktur. E-faktur yang menjadi topik panas belakangan ini diterangkan seperti dalam video tutorial berikut ini

Perlu dicatat bahwa e-faktur pada akhirnya akan diterapkan secara nasional dan mulai diterapkan di Jawa dan Bali sejak bulan Juli 2015.

Video Tutorial dari HMRC UK (Inggris)
Otoritas pajak di Inggris, HM Revenue and Customs, juga memiliki account youtube serupa yang memberikan video tutorial atas program aplikasi pajak di Inggris.

Sebagai contoh, dibawah ini adalah video tutorial e-filling di Inggris

Melihat video tutorial diatas, saya dapat memahami perbedaan antar perhitungan pajak di Indonesia dan Inggris. Dapat dikatakan perhitungan pajak di Inggris jauh lebih rumit dari Indonesia.

Dapat dilihat bahwa account youtube HMRC mempunyai lebih dari 7900 subscriber namun account youtube DJP hanya memiliki sekitar 780 subscriber pada saat tulisan ini dibuat.

Perlu diingat bahwa video youtube dapat disaksikan secara offline di perangkat elektronik seperti smartphone dan tablet.

DJP sudah membuat hal yang baik dengan video tutorial yang bagus namun mungkin diperlukan lebih banyak sosialisasi agar account youtube tersebut dapat dilihat dan dikenal banyak orang.