The Impact of Digital Tax Policy on Technology Company Compliance from a Business Contract Law Perspective

Abstract: The dynamics of the global economy, which now relies on the digital ecosystem, have triggered serious challenges to the country's fiscal weaknesses, particularly in determining tax revenues. Indonesia faces a major dilemma: the conventional, geographically rigid concept of a Permanent Establishment (PE) has proven ineffective in reaching technology giants that generate profits without a physical presence. This regulatory inadequacy creates a wide loophole for Base Erosion and Profit Shifting (BEPS) practices that harm the state treasury. This article examines how Indonesia's digital tax policy affects the behavior of technology companies, by examining loopholes in business contract law that often go unnoticed. The study reveals a harsh reality: technology companies' compliance with VAT on PMSE (E-Commerce) in Indonesia is merely a superficial or pragmatic approach. They comply not out of legal awareness, but rather to avoid "digital execution" sanctions in the form of access blocking. Ironically, contractually, global platforms are actually executing clever maneuvers by unilaterally amending their Terms of Service (ToS) clauses. This tax shifting practice systematically shifts the tax burden onto local consumers, thus violating the principle of parity of arms, or the balance of bargaining power in contracts. This paper concludes that Indonesia's unilateral measures must be immediately benchmarked in the global context through Pillars 1 and 2 of the OECD, coupled with strict protection of digital contract pricing structures to prevent consumers' economic rights from being continuously eroded by the dominance of transnational corporations. Keywords: Fiscal Sovereignty, Digital Tax, Tax Shifting, Parity of Arms, OECD Consensus. Title: The Impact of Digital Tax Policy on Technology Company Compliance from a Business Contract Law Perspective Author: Sri Susi Rahayu, Martalib, Udin, Aman Nurkholis, Muhammad Basir, Pandri Zulfikar International Journal of Management and Commerce Innovations ISSN 2348-7585 (Online) Vol. 14, Issue 1, April 2026 - September 2026 Page No: 412-421 Research Publish Journals Website: www.researchpublish.com Published Date: 19-May-2026 DOI: https://doi.org/10.5281/zenodo.20285254 Paper Download Link (Source) https://www.researchpublish.com/papers/the-impact-of-digital-tax-policy-on-technology-company-compliance-from-a-business-contract-law-perspective

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Publication Details

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Zenodo (CERN European Organization for Nuclear Research)
Published
2026-05-19
DOI
https://doi.org/10.5281/zenodo.20285254
Primary Topic
Legal and Policy Analysis in Indonesia
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article
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article

The Impact of Digital Tax Policy on Technology Company Compliance from a Business Contract Law Perspective

Pandri Zulfikar, Sri Susi Rahayu, Aman Nurkholis, Muhammad Basir et al.
Zenodo (CERN European Organization for Nuclear Research)
Legal and Policy Analysis in Indonesia
article

The Impact of Digital Tax Policy on Technology Company Compliance from a Business Contract Law Perspective

Pandri Zulfikar, Sri Susi Rahayu, Aman Nurkholis, Muhammad Basir, Udin, Martalib
article en

Abstract

Abstract: The dynamics of the global economy, which now relies on the digital ecosystem, have triggered serious challenges to the country's fiscal weaknesses, particularly in determining tax revenues. Indonesia faces a major dilemma: the conventional, geographically rigid concept of a Permanent Establishment (PE) has proven ineffective in reaching technology giants that generate profits without a physical presence. This regulatory inadequacy creates a wide loophole for Base Erosion and Profit Shifting (BEPS) practices that harm the state treasury. This article examines how Indonesia's digital tax policy affects the behavior of technology companies, by examining loopholes in business contract law that often go unnoticed. The study reveals a harsh reality: technology companies' compliance with VAT on PMSE (E-Commerce) in Indonesia is merely a superficial or pragmatic approach. They comply not out of legal awareness, but rather to avoid "digital execution" sanctions in the form of access blocking. Ironically, contractually, global platforms are actually executing clever maneuvers by unilaterally amending their Terms of Service (ToS) clauses. This tax shifting practice systematically shifts the tax burden onto local consumers, thus violating the principle of parity of arms, or the balance of bargaining power in contracts. This paper concludes that Indonesia's unilateral measures must be immediately benchmarked in the global context through Pillars 1 and 2 of the OECD, coupled with strict protection of digital contract pricing structures to prevent consumers' economic rights from being continuously eroded by the dominance of transnational corporations. Keywords: Fiscal Sovereignty, Digital Tax, Tax Shifting, Parity of Arms, OECD Consensus. Title: The Impact of Digital Tax Policy on Technology Company Compliance from a Business Contract Law Perspective Author: Sri Susi Rahayu, Martalib, Udin, Aman Nurkholis, Muhammad Basir, Pandri Zulfikar International Journal of Management and Commerce Innovations ISSN 2348-7585 (Online) Vol. 14, Issue 1, April 2026 - September 2026 Page No: 412-421 Research Publish Journals Website: www.researchpublish.com Published Date: 19-May-2026 DOI: https://doi.org/10.5281/zenodo.20285254 Paper Download Link (Source) https://www.researchpublish.com/papers/the-impact-of-digital-tax-policy-on-technology-company-compliance-from-a-business-contract-law-perspective

Zenodo (CERN European Organization for Nuclear Research)
Peace, Justice and strong institutions
Openalex Percentile: Top 1%
Legal and Policy Analysis in Indonesia
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