Asia’s policy makers vow to tackle tax avoidance of multinationals

Asia’s high level policymakers have emphasised the need of introducing strong tax reforms and strengthening tax systems as a key development priority for the implementation of the 2030 Sustainable Development Goals (SDG).

They recognised that strong tax systems are essential for enhancing state building and international tax reforms are integral to domestic tax system development.

The issue of corporate tax avoidance has gained prominence, and new initiatives have been started to tackle international tax issues, including the automatic exchange of information and the G20-OECD Base Erosion and Profit Shifting (BEPS) project.

Sluggish global growth and the pursuit of foreign direct investment to boost national economies and employment have amplified tax competition, they pointed out adding that the lack of harmonisation and coordination on tax incentives among ASEAN member governments has only intensified the race to the bottom, at the expense of revenue in the region.

These issues were discussed in-depth at the two day, high-level conference on “International Taxation in Asia” inaugurated by Indonesian Finance Minister Sri Mulyani Mndrawati and IMF's Deputy Managing Director Mitsuhiro Furusawa in Jakarta on Wednesday.

High-level policy makers from the region, senior staff from international and regional organisations, senior staff from Ministries of Finance and Tax Administrations, and members of academia and civil society were among those attended the conference.

Indonesia plans to boost its tax collection and take collective action with other countries to devise new tax laws rules to prevent the "aggressive" tax planning for tax avoidance by multinational companies (MNC), Ms. Sri Mulyani Indrawati revealed when she delivered the keynote address at the conference.

She noted that the tax-complying local companies were in a serious disadvantageous position as a result of tax avoidance tactics of big companies. Corporate tax avoidance has put Indonesia's local businesses that comply with regulations at a competitive disadvantage, she said.

She served as the managing director at the World Bank and an executive director at the IMF previously.

The IMF has been working with all countries to address tax evasion and avoidance by seeking practical solutions, Mr. Furusawa disclosed adding that this includes helping countries to devise ways to counter the artificial shifting of profits and assets to low- tax locations and how to resist damaging tax competition.

A recent element of this work has been longstanding IMF advice on the indirect transfer issue. This work is being taken forward in cooperation with the OECD, World Bank, and United Nations within the framework of the newly established ‘ Platform for Collaboration on Tax’, he added.

The lack of harmonisation and coordination on tax incentives among ASEAN member governments has only intensified the race to the bottom, at the expense of revenue in the region, he pointed out.

Against this backdrop, the conference has provided a forum to engage policymakers on issues related to domestic resource mobilisation, including through international tax reforms.