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4/29/2015
Indonesia, South Africa, and Brazil are prominent developing countries in the
world.
Indonesia: has higher and more stable growth compared with Asia-pacific average.
Afrika Selatan: GDP per capita far outperformed Sub-Saharan Africa average.
Brazil: 7th biggest economy in the world (2013)
GDP Growth, Indonesia vs East Asia and Pacific
8
6
4
2
0
10000
5000
1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
2009
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Indonesia
South Africa
Source: data.worldbank.org
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Indonesia
South Africa
Brazil
OECD
70
70
70
70
60
60
60
60
50
50
50
50
40
40
40
40
30
30
30
30
20
20
20
20
10
10
10
10
0
2002 2005 2007 2008 2009 2010 2011 2012 2013
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2000
2005
2007
0
2001 2002 2003 2004 2005 2006 2007 2008 2009
0
2000 2005 2007 2008 2009 2010 2011
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South Africa
Brazil
OECD members
40
30
20
10
0
2001
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2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
5
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Although the income tax revenue is more dominant than consumption tax, the
revenue of income tax mostly obtained from employees through PAYE system.
It shows us that tax paid by the middle class (employees), not by self-employed individuals.
South Africa
62%
60%
2%
36%
2%
100%
Brazil
14%
8%
6%
46%
41%
100%
8
Personal income tax system in Indonesia and South Africa do not show
progressivity. It is proved by relatively low marginal rate and relatively high income
level that subject to the highest rate.
Marginal tax rate in Indonesia, South Africa, Brazil, and
United Kingdom, 2014.
50%
45%
40%
Tax Rate
35%
30%
25%
20%
15%
10%
5%
0%
0
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6
8
Annual Income divided by GDP Per capita
10
INFID-FFD
29april 2015UNESCAP-MOF
Indonesia
South
Africa Jakarta.
Indonesia
Brazil
United Kingdom
12
14
9
Gender Inequality
Indonesia treat family as single taxation unit. As a result, married woman that
have their own tax ID potentially pay more tax due to the progression of income
tax rates.
In Indonesia, a wife with income from one employer is not combined but income
from self-employed activities need to be combined with the husband's income.
VAT in South Africa even burdens men more heavily than women by a margin of
about 8%. Each ZAR 1 spent, families with male head 9:23 cent pay VAT while
families with female head paying 8:13 cents.
One of the contributing factors is the consumption behavior. Indirect taxes are
higher on alcohol and tobacco as well as taxes on fuel burdening more to male
family.
Indonesia does not provide an exception of non-taxable goods in the gender
perspective.
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High corporate income tax rates could potentially lead to capital flight to countries
with low tax
Tarif Corporate Income Tax 2006-2014 (%)
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Indonesia
Afrika Selatan
OECD Average
Global Average
Brazil
38
36
34
32
30
28
26
24
22
2006 2007 2008 2009 2010 2011 2012 2013 2014
11
Indonesia, South Africa, and Brazil have large proportion of informal economy
Large informal sector reduce tax revenue potential
13,4
Brazil
39,0
South Africa
27,3
Indonesia
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18,9
0
10 Jakarta.15
20
25 Indonesia
30
INFID-FFD
29april 2015UNESCAP-MOF
35
40
45
12
Tax Revenue Loss Estimates Some Developing Countries (G20) Originating from
Bilateral Trade mispricing by the European Union and the United States
(millions GBP)
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Country
1
2
3
4
5
6
7
8
9
10
China
Rusia
Korea
Brazil
Kuwait
Meksiko
Venezuela
Argentina
Indonesia
Arab Saudi
Financial Asset
in Tax Haven
(billion USD)
1.189
798
779
529
496
417
406
399
331
308
Negara
China
Russian Federation
Mexico
India
Malaysia
Brazil
Indonesia
Thailand
Nigeria
South Africa
Total
1.252
974
514
440
395
217
188
172
157
122
13
Transfer Pricing
Transfer pricing is often associated with
the company's actions in the set price so
that the transfer tax payable in a country
can be transferred to other countries.
Among the countries of the G-20, Brazil,
Indonesia, and South Africa are ranked
4,5, and 6 respectively in term of the
amount of tax revenue lost due to transfer
pricing.
Transparency of Information.
A key aspect of multilateral
cooperation is exchange of
information.
In 2014, OECD created of one common
global standard for the automatic
exchange of financial account
information, which has been made
available for all jurisdictions to use.
14
15
16
A growing momentum....
In October 2014, the Ministers of Finance of Francophone countries called for a high level
meeting on tax under UN auspices
As part of the FFD discussions in NY, the G77 group stated: While there is increasing recognition
of the central role of tax systems in development, there is still no global, inclusive norm setting
body for international tax cooperation at the intergovernmental level. There is also not enough
focus on the development dimension of these issues. This should be one of the key deliverables in
the Addis Ababa Outcome Document.
An international tax body was also called for by a number of countries at this months drafting
session, including India, Brazil, and Senegal
The African group also called for strengthening the role of the UN in promoting international
cooperation on tax matters, including setting up an intergovernmental tax body, as demanded
several times by many developing countries.
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18
19
Conclusions
Indonesia and South Africa have relatively low revenue performance
Brazilian tax system are very regressive due to domination of indirect taxes.
Individual tax revenue in South Africa and Indonesia are significantly raised by tax revenue of employees,
compared to very little contribution from self-employed individual.
In terms of individual income taxation, these three countries have maximum rates that are relatively low
compared to developed countries that make them less progressive.
The taxation policy of the three countries as a whole has not been reflected in the context of gender justice.
One cause of the low level of tax revenue is massive amount of tax evasion and tax avoidance. This is done
by using artificial international taxation scheme, equipped with the use of tax havens jurisdiction.
The G20/OECD Base Erosion and Profit Shifting (BEPS) Action Plan is a good first step towards addressing
problems in the international tax system, but BEPS Action Plan doesn't seem enough for developing
countries.
There is a need for more inclusive and fair reform of global tax rules, where developing countries are
included with an equal seat at the table. The creation of an intergovernmental body for cooperation on tax
matters under the auspices of the UN is a crucial step. The 2015 Financing for Development (FFD) process
can lead to the creation of a global tax body, but timelines are very short.
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20
Recommendations
Indonesia, South Africa, and Brazil need to maximize their tax
revenue potential so they can increase public spending to fund
social spending needed for inequality reduction.
Brazil should be able to reduce its reliance on consumption taxes
and the income tax system. Brazil also has to reduce the
complexity of their VAT administration.
Beyond BEPS Action Plans, developing countries need to call for more
inclusive and fair reform of international tax rules and support the calls
for the creation of a new intergovernmental body on tax.
An intergovernmental body on tax would create a global Forum in which
developing countries can raise issues such as reviewing the application
of tax treaty and tax treaty abuse, proposing application of unitary
taxation regime, proposing formulary apportionment with country-bycountry reporting as an alternative of the arm's length principle, and
pressing developed countries to provide assistant in the
implementation of information exchange as well as enhancing
transparency of beneficial owners in international tax scheme so the
artificial profit shifting can be reduced.
The Financing for Development (FFD) process currently underway and
completing in June/July 2015 provides an opportunity to create an
intergovernmental body on tax
Indonesia needs to change the family unit tax into individual tax
so women are not harmed by higher marginal tax rates. Indonesia,
South Africa, and Brazil need to consider basic needs required
differently by gender.
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22
Thank You!
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