The newly announced e-commerce tax for online platforms was not sufficient to be classed as equal treatment with offline retailers, despite the government arguing so, said Tutum Rahanta, deputy chairman of the Indonesian Retailers Association. 

“We think that the government has made an effort to support us. However, the e-commerce tax will only serve as an ‘antidote’; it won’t be enough to create equal treatment [between offline and online businesses],” he told reporters in Jakarta on Wednesday.

The government will tax transactions on e-commerce platforms starting from April this year, as stipulated in Finance Ministerial Regulation No. 210/2018, in an effort to boost tax revenue and improve tax compliance. 

Tutum said to ensure fairness, any rule that the government applies to offline stores has to also be applied to online platforms as well. For example, if products sold in offline stores needed to comply with Indonesian National Standards, then the same requirement must also be applied to products sold online, he said.

Another problem sounded out by the association was that many e-commerce businesses gave massive discounts to customers. As a result, products were often priced below the cost of manufacturing. 

“Those kinds of practices [selling products below the cost of manufacturing] are dangerous,” he said. “If we as retailers, for instance, sell eggs in supermarkets below prices in traditional markets, the Business Competition Supervisory Commission will approach us. It is considered predatory pricing according to government regulations.”

Aggressive competition between online and offline retailers has caused retail giants to suffer huge losses. Recently, publicly listed retailer Hero Supermarket closed 26 of its stores and laid off 532 employees as part of its efficiency measures. 

PT Central Retail Indonesia, the local operator of Thai retail giant Central Department Store, also announced the closure of its store in Neo Soho Mall in West Jakarta, which the company said was underperforming.  

Sogo Indonesia CEO Handaka Santosa concurred that offline retailers were facing big challenges because of unequal treatment with online stores from the government.

However, he emphasized that PT Panen Lestari Internusa, which operates Sogo department store, Seibu, Galeries Lafayette, Alun Alun Indonesia and other upscale brands, had still booked double-digit sales growth. 

He was confident that the company would achieve 15 percent sales growth this year compared to 2018, as it continues to provide a better customer experience in its stores as well as through collaborating with e-commerce platforms.

He believed that the opportunity to expand the offline retail business still existed because Indonesia had a population of over 260 million with increasing purchasing power. 

“We will open a new Sogo department store in Medan [North Sumatra] in September this year,” he said, adding that the company managed 18 Sogo department stores.

The company also has its own online platform mapemall.com, although the contribution to its overall business was relatively small. Sogo department stores recorded sales of Rp 3.9 trillion (US$279.1 million) last year, Handaka said. 

Commenting on the call for equal treatment from offline retailers, Tatum Ona Kembara, vice president of growth at online retailer blibli.com, said the company had always followed the government’s regulations, including the requirement for online sellers to provide their taxpayer or identity number.

“Offline retailers should make use of our online platforms to collaborate and expand their sales channels,” she suggested.

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