Government Challenges Over Global Electronic Commerce Using FinTech: Design of Consumer Payment Tax (CPT) System

Introduction

Fintech has evolved and provided huge benefits for businesses and consumers around the world in an efficient way to trade goods and services globally, especially contents transaction, while at the same time, it simultaneously poses a new set of challenges facing governments’ own tax jurisdiction, with particular emphasis on consumption taxes. As the name implies, the consumption tax is levied on consumers and the country wherein a consumer lives – consumer’s country- has its jurisdiction to collect the consumption tax according to an internationally agreed principle. However, there has been a gray area whether they pay the taxes to the consumer countries in accordance with the consumer country tax jurisdiction, as long as the global electronic commerce taxation is paid in such an existing way that the consumption taxes used to be collected by business and conveyed to the taxation office of supplier. Moreover, distributed cryptocurrencies or virtual assets such as Bitcoin is making the taxation matters worse.

Likewise, differences in the tax systems among various countries pose another challenge to tax administration, causing to reduce in tax revenue for the consumer’s countries. While the U.S. has adopted the sale tax system, most EU members have applied the Value Added Tax (VAT) system, and ASEAN member countries have various consumptions taxes including VAT, Goods, and Service Tax (GST). In accordance with the existing method, supplier used to collect consumption taxes and pay to their taxation office periodically. Furthermore, global electronic commerce suppliers, with particular emphasis on major providers, have probably been providing their good and services without paying associated consumption taxes that it can worse a financial inclusion between developed and developing countries in the level of jurisdiction, taking into consideration that most global suppliers are from developed countries, but consumers are located in developing countries. The emergence of fintech is providing a promising vehicle of tackling this phenomenon by closing the gap in the global digital economy, bringing a long-term societal transformational change, while leading to inclusive economic growth helping move towards a more just and equitable society (Roland Schwinn and Ernie G.S. Teo, 2018, pp. 481-492).

Fan Li (2017) looked at the problems generated from the new tax policy, study and analyze the related causes and rethink the insufficiency of the whole customs management model. Taxation of e-commerce is currently high on the political agenda, both in the European Union and beyond, with significant efforts being put into creating rules ensuring undistorted functioning of the internal market and effective taxation of the digital economy without creating barriers for online trade (Marta Papis-Almansa, 2019, pp. 220-221). In Indonesia, the revenue loss is potentially getting bigger in the coming years if the government still fails to collect the tax and tax policy in Indonesian e-commerce can be potentially used for the purpose of regulating the economy, such as to control excessive online import purchasing (Sigit Setiawan, 2018, pp. 7-8). There is an urgent need for a change in the tax legislation related to arising field of electronic commerce because it deprives governments of tax revenues and gives foreign-based digital businesses an advantage over their tax-paying domestic competitor (Nazarov et al, 2019). Technical recommendations are to develop current tax laws in line with the technological developments of global e-commerce laws, to raise the efficiency of income and sales tax assessors through scientific and practical courses, to increase international cooperation in the field of e-commerce and to benefit from the experiences of developed countries in this field (Rafat Salameh et al, 2021, pp.4-5).