Indonesia as Middle Power on Taxation to Pursue Developing Nation Perspective in BEPS Inclusive Framework Through G20 (Behavior Approach)

In 2022, Indonesia had a special occasion as the Presidency of G20 held in Bali while still in the middle of recovery after COVID-19 Pandemic and instability of global geopolitics. Through its presidency, Indonesia as a middle power seems to try to be a bridge for developing and underappreciated nations to be considered for their aspirations in international tax agenda and standard that G20 collaborated with OECD in BEPS inclusive framework. In the context of International Taxation mostly referring to the Inclusive Framework of Base Erosion and Profit Shifting provided by OECD but also collaborated with G20, it seems like Indonesia truly performs itself as a middle power and uses its title of presidency to promote the voice of developing nations.

Proved by Indonesia’s Minister of Finance, Sri Mulyani, who also opened the Ministerial Symposium on Tax and Development on behalf of G20 Presidency, conveyed the special challenges faced by developing countries in implementing international tax standards, and highlighted the importance of ensuring their important participation in the design and implementation of international taxes. She underlined the importance of ensuring all countries make progress on tax transparency and efforts to combat BEPS, stating that “no country should be left behind.” Several other things that are of concern to the Ministers are the new global minimum tax system encouraging developing countries to reflect on their domestic tax regimes, and to look again at the tax incentive policies provided in order to attract investment. In addition, the ministers also discussed opportunities for developing countries to take advantage of tax policies to promote progress on Sustainable Development Goals such as those relating to health and the environment.[1]

To support this argument, firstly, Indonesia has to be classified as a middle power to have credibility to speak on behalf of developing nations in terms of taxation. As previously mentioned in the previous article regarding Indonesia as a middle power in taxation with a ranking approach, there are basically two approaches to identify a nation to be a middle power, quantitative (ranking) and qualitative (behavior) approach. The ranking approach has the ability to measure the power of the state and make it comparable to other countries in the hierarchy even though it makes the state an inanimate object because it does not describe the behavior of the middle power which has various strategic “personalities” in shaping the interests of the state and its foreign policy.[2]

Therefore, the qualitative measure using the characterization approach will be more fruitful in explaining a country’s behavior to play its role as a middle power like Indonesia. Although these measures it’s really subjective and depends on the eye of its observer, further, this approach has more branches to make each nation suitable for each behavior. Through this approach, middle power could be divided more into either traditional or emerging middle power depending on its emergence in international hierarchy and also be divided into revisionist, status quo seeking middle power or soft-revisionist bridge builder based on its behavior towards current international status quo.

Over all divisions of classification middle power, early identification of middle power qualitatively based on the characteristics of its behavior patterns in the international sphere according to Charalampos Efstathopoulos. Then, Efstathopulos identifies a middle power based on a nation that has performed the role of good international citizens, supporters of multilateralism and supporters of international order. Good international citizens mean that the middle power has a commitment to rules and shared values such as human rights, international law and so on. Foreign policy to fulfill good international citizens itself is not always altruism but rather is a meeting between the interests of the state and the values adopted at the international level. Robert W Cox in his writings states that middle power implements these values along with its tendency to maintain its degree of autonomy from major power. This means that the middle power is safe from the intervention of the major powers and is able to carry out its commitment to facilitate gradual changes in the international system.[3]

This behavior could be seen from Indonesia in the international tax regime that Indonesia tries to comply with the international regime of BEPS Inclusive framework. The international regime of BEPS is promoting its standards and shared values to prevent Base Erosion Profit Shifting with the 15 actions and Indonesia being one of its obedient signees means Indonesia performing the role of good international citizens. Indonesia also tries to carry out a gradual change in the international tax regime of BEPS that mostly dominated with developed nations to be more inclusive to developing nations not only as a signatory but also in the agenda and standard setting of the international regime.

As noted earlier, middle powers also demonstrate a strong preference for multilateralism or become supporters of multilateralism. By engaging in multilateralism, they can overcome their lack of bargaining power at the bilateral level. It also provides an opportunity for them to gain legitimacy and moral authority for their diplomatic initiatives. Given the inclination to be perceived as good international citizens, they have a greater stake in multilateralism than other states.[4]

Indonesia is also one of nations that have the spirit to promote the international regime of BEPS inclusive frameworks to be implemented and also discussed by the members of developing nations not only amongst developed nations. Indonesia truly supports the effort of OECD and G20 to be universally implemented and relevant to most international audiences both developed and developing nations so international cooperation to combat BEPS could be achieved. This means Indonesia showing its role as supporters of multilateralism through BEPS Inclusive Framework that nations both developed and developing to incorporate in this multilateral framework.

The behavior approach also points out that the role of middle powers is tied to the political visions or grand strategies of the Great Powers who set the limit on what middle powers can or cannot do. This means that middle powers are supporters of the current world order that the United States created after the end of the Second World War. The current order is primarily an open, rules-based international order characterized by free markets, multilateral cooperation and a growing democratic community.[5]

As a middle power that has a role to support world order, Indonesia might support some of these values such as multilateral cooperation and democratic community, but free markets are values that have to be tested by Indonesia and perhaps some other nations both developed and developing in terms of taxation. This is because free market values drive the intention of companies to have the base erosion and profit shifting strategy in the first place, therefore Indonesia and most of the members of the international regime of OECD/G20 BEPS try to regulate justly. The world order by the US and its allies also contends the BEPS is driven by extensive free markets, thus, Indonesia and current world order is kind of getting along and supporting each other with some notes from Indonesia.

However, not all middle power countries fully support the world order that has been formed because, according to Eduard Jordaan, emerging middle power or middle power that emerged after the cold war is reformist towards the international order such as BRICS, Indonesia and others. This is because the middle power category comes from a semi-peripheral or even peripheral position in the world economy that wants to reform the rules and regulations of the world economy, although not fundamentally.

In contrast to the traditional middle power that emerged during the cold war such as Australia and Canada which came from a core position in the world economy with a calming nature or trying to pacify and contain potential threats to the world order such as international aid agendas. According to Jordaan, international assistance can provide a calming and deterrent effect on requests for fundamental changes in the global economy because it works in a similar way to subsidies to restrain reforms in the welfare state. A more radical difference in agenda from emerging middle powers occurs because they demand more benefits that so far have been felt by core countries, including traditional middle powers.[6]

The division still continues between emerging middle powers which are mostly resisting current international order such as BRIC (Brazil, Russia, India and China) and normative bridge builders that act as soft revisionist such as Indonesia, South Korea and Turkey. Awidya Santikajaya who sees the role played by Indonesia can be considered as a “bridge builder” so that Santikajaya sees that the role of Indonesia is different from middle power in general. Indonesia acts as a middle ground player and mediator, placing itself in the middle between various countries, many of which are stronger. Indonesia has posed itself as a conflict mediator, encouraged parties to find a common position, and rejected confrontational approaches that could increase competition. This view is seen by comparing the two spectra of BRIC countries that are quite against the system or other middle power countries that support the system.[7]

Then Santikajaya compared it to the BRIC countries (Brazil, Russia, India and China) or revisionists who were less enthusiastic about playing the role of bridge builder. The group’s diplomatic activities are more focused on building a larger negotiating bloc that can improve their position through endeavors such as South-South cooperation. Although the group has played the role of bridge builder in the past, as their power has increased their global ambitions have overshadowed the group’s bridge building efforts. The role of bridge builders in Indonesia has some similarities with middle power in terms of middle power in the sense that both behaviors reflect motives to be a good international community and support for consensus-based multilateral cooperation. Nonetheless, the differences between Indonesian bridge builders and middle power are generally clear from an ideological and capability perspective. From an ideological point of view, the middle powers have traditionally been developed countries, so their middlepowermanship role aims to perpetuate the US-led global system. On the other hand, because of its status as a developing country, Indonesia’s bridge-building ambitions are directed at bringing a developing country’s perspective into global issues.[8]

This attitude could be seen when Indonesia was in the G20 presidency that Indonesia embraced G20 regarding the implementation of BEPS action 1, Pillar one and two to become an international agenda because G20 is well known as a group that could lead the international agenda. Indonesia could seem to be making an effort to be persuasive toward the US as the current global order ruler in accordance to making the BEPS inclusive framework working justly for both developed and developing nations. Toward US, Indonesia seems to have an attention regarding the implementation of Pillar Two of BEPS that precedes the Pillar One that will have an impact mostly on the US as most of the world’s digital MNEs residing in US and will be taxed unilaterally by other nations. Therefore, to support US from unilateral measure of other nations, Indonesia encourages the implementation pillar one or finishing the Multilateral Convention to any prevent harmful unilateral measure toward digital MNEs that mostly based in US and advanced nations.[9] This means Indonesia do still having support toward US and its developed nations allies just like traditional middle power and unlike most revisionist middle who is resistance.

At the moment, Indonesia also really encourages the term “inclusive” or showing to the international audience specially to developing nations that this framework is unique and different from most of OECD policy that seems to be exclusively for its members that most of them are advanced countries. Indonesia Therefore, as bridge builder, Indonesia is really promoting this inclusive framework to be implemented to most nations even outside of the membership of OECD. Indonesia as its FinanceMinister at G20 opening also pointed out that the discussion of the inclusive framework has to be truly including developing nations with their aspiration and they not only as members who only signed but also participate in the debate and the composing of the program itself. Therefore, there is a subtle revision that Indonesia upholds through G20 in the discussion of BEPS Inclusive framework to be truly inclusive toward developing nations to the upstream process. This behavior really represents the attitude of Indonesia as middle powers that having special role as bridge builder or making connections between the two worlds, developed and developing nations as both supported by Indonesia to be cooperated.


TBrights is a tax consultant in Indonesia which currently is an integrated business service in Indonesia providing comprehensive tax and business services

By Olina Rizki Arizal



[2] Carr, Andrew (2014). Is Australia a middle power? A systemic impact approach. Australian Journal of International Affairs, 68(1), 70–84. doi:10.1080/10357718.2013.840264

[3] Charalampos Efstathopoulos, “Middle Powers and the Behavioural Model”, Global Society 32, no. 1 (2018): 56;

[4] Ibid

[5] Charalampos Efstathopoulos, “Middle Powers and the Behavioural Model”, Global Society 32, no. 1 (2018): 56;

[6] Jordaan, Eduard.(2003). The Concept of a Middle Power in International Relations: Distinguishing between Emerging and Traditional Middle Powers. Politikon: South African Journal of Political Studies, 30(1), 165-181.

[7] Santikajaya, Awidya. “Walking the Middle Path: The Characteristics of Indonesia’s Rise.” International Journal 71, no. 4 (2016): 563-86. Accessed December 8, 2020. doi:10.2307/26414058.

[8] Santikajaya, Awidya. “Walking the Middle Path: The Characteristics of Indonesia’s Rise.” International Journal 71, no. 4 (2016): 563-86. Accessed December 8, 2020. doi:10.2307/26414058.


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