T

he government has reiterated that it is taking careful steps in assessing the possibility of imposing import duties on intangible goods purchased electronically amid Indonesia’s growing e-commerce industry.

Finance Minister Sri Mulyani Indrawati said the government was still in ongoing discussions with other member countries of the World Trade Organization (WTO) and World Customs Organization (WCO) to ensure that the plan would not breach any global agreements on trade.

“[The issue] is still being discussed by the WCO and the WTO and they still have not decided on anything,” she said recently. “But they have agreed to first implement [the WTO] moratorium in 2018.”

The WTO’s 11th Ministerial Conference in Argentina last December decided to extend the implementation of a 1998 moratorium on imposing import duties on electronic transmissions for another two years.

The 1998 WTO moratorium does not necessarily ban countries from imposing duties on digital products sold electronically as it only applies to electronic transmissions, which include telephone calls, fax messages
and emails.

As the moratorium only applies to electronic transmissions, it gives the Indonesian government a chance to impose duties on intangible goods imported to Indonesia through electronic means, such as downloadable music, e-books and software, etc.

“We will base our future actions according to global customs regulations because all of them [the countries] will be facing the same problem on digital commodities, which cannot be destroyed [if purchased illegally], but influence our trade balance [at the same time],” Sri Mulyani said.

In its quest to seek revenue from the e-commerce boom, the government first floated the idea of slapping import duties on intangible goods purchased electronically last December. It could start implementing the proposed policy this year.

It has even issued a Presidential Regulation No. 74/2017 ordering the establishment of an e-commerce roadmap, which includes taxation on tangible and intangible goods purchased on online platforms.

The Finance Ministry is reportedly in the process of writing a Finance Minister’s Regulation (PMK) to enable the policy.

The upcoming regulation will also revise the existing PMK No. 182/2016, in which imported goods bought online will be exempted from import duties if the goods sent via shipping are below US$100.

Introducing new types of duties and excises have been among government measures to generate income apart from taxes, which remain the biggest contributor to state revenue.

According to the 2018 state budget, duties and excises are expected to contribute Rp 194.1 trillion ($14.3 billion) to state income, up slightly from the Rp 192.4 trillion collected last year.

Meanwhile, this year’s revenue target stands at Rp 1.62 quadrillion, up from Rp 1.47 quadrillion posted in 2017.

Despite growing rapidly in the last few years the e-commerce industry had only contributed 0.75 percent to Indonesia’s gross domestic product (GDP) based on Bank Indonesia data, said Bhima Yudhistira Adhinegara, a researcher at the Institute for Development of Economics and Finance.

By comparison, China and the United States recorded that 1.67 percent of their GDP came from digital transactions in the same period, data from market statistics portal Statista showed.