T

he government plans to levy taxes on e-commerce that will affect billions of dollars of online transactions each year nationwide.

Deputy Trade Minister Bayu Krisnamurthi said that the taxes, notably value-added tax, would be applied on each transaction made by Indonesian individuals and domestic companies and on goods distributed throughout the archipelago.

'€œWe are now designing both trade and financial instruments to regulate the transactions in a bid to set the taxes,'€ he said on Friday.

To implement the new rule, the government would team up with a leading global software company to monitor each electronic transaction and detect whether the parties involved had paid the duties.

E-commerce in Southeast Asia'€™s largest economy is experiencing a boom on the back of a rise in people'€™s purchasing power that has resulted in an emerging middle class coupled with rapid Internet utilization.

Internet users already top 80 million at present and the figure is projected to double in the next three years, according to the Indonesia Internet Association.

Daniel Tumiwa, chairman of the Indonesian E-Commerce Association (IDEA), responded the government'€™s plan positively, saying that the business group agreed that anyone who reaped income from e-commerce had to be taxed.

Basically, he said, Internet-based transactions were similar to conventional transactions.

'€œWe don'€™t have any problem being charged sales tax or other taxes. But, the government should really think about the technicalities before implementing the plan,'€ he said.

As the room to expand is still huge, the country may serve as a lucrative market in the region for e-commerce.

Local e-commerce provider Vela Asia said the domestic e-commerce market would jump to US$25 billion in 2016 from only $8 billion last year.

Daniel pointed out the need to respect the privacy policy in Internet-based transactions, saying that the principle was strictly upheld by other countries which had adopted regulations on e-commerce, such as by disclosing the identity of individual sellers.

'€œWe will have objections if the government, for example, forces providers to reveal the data of their vendors,'€ he said.

Daniel added that the base to determine the value of taxes, such as the location of the goods purchased or delivery, should also be clearly defined.

The breakthrough will solve the difficulties that the government earlier had in its efforts to monitor e-commerce through a legal approach.

Under the previous approach, the regulation could only be implemented within Indonesian territory, while in fact online transactions occur across borders.

The new arrangement for the online trade is a step forward in implementing the Trade Law passed earlier this year. The law aims to ensure the protection of e-commerce customers by requiring individuals or companies trading online to provide accurate and complete information for buyers.