Cross-Border Digital Taxation Challenges: Indonesia’s Practices and Perspectives

Abstract

The vision to tax digital economy-sourced income effectively, in the form of both indirect and direct taxation, has become clearer since the late 2010s as digitally based transactions and businesses are growing rapidly. In 2020, Indonesia began to introduce more solid legislative regulation to capture potential tax revenue from the digital economy, despite the difficulties embedded in digital economy tax, such as the absence of physical presence, the complex nature of transactions carried out in the digital economy, and the problem of obtaining reliable data. This chapter aims to (1) examine Indonesia’s process of establishing a digital economy tax system by analyzing the country’s regulation concerning direct and indirect tax of the digital economy and the identified challenges in its implementation and (2) propose policy recommendations to realize a well-established and reliable digital economy tax system.