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Jakarta Post

Online retailers approve of revocation of e-commerce tax regulation

  • Marchio Irfan Gorbiano

    The Jakarta Post

Jakarta   /   Mon, April 8, 2019   /   08:12 am
Online retailers approve of revocation of e-commerce tax regulation President Joko “Jokowi” Widodo (right) and Bukalapak CEO Achmad Zaky are pictured during the online marketplace’s ninth anniversary celebration in Jakarta. (The Jakarta Post/Wendra Ajistyatama)

Representatives from online marketplaces and online retailers have welcomed the government’s decision to revoke a regulation on e-commerce taxes that was originally to be enforced on April 1.

Critics of the regulation argued it would have halted the growth of the e-commerce industry, which is still in early stages of the development, and discourage businesses, especially small companies, from using e-commerce to reach out to more customers.

Finance Ministerial Regulation (PMK) No. 210/2018, which was signed on Dec. 31, mandates that online marketplaces collect information such as tax numbers and personal identity numbers. The regulation also provides clarification on income tax rates for online sellers.

The regulation also stated that online transactions were subject to taxes that also applied to offline transactions such as value-added tax and luxury goods tax.

Indonesian E-Commerce Association (idEA) chairman Ignatius Untung welcomed the revocation, saying the decision was the right one for ensuring further growth in the e-commerce sector.

“We appreciate this decision [to revoke PMK No. 210/2018], which is a decision for the greater interests [of the e-commerce industry],” said Ignatius.

He previously said that the regulation, if enforced, would introduce an uneven playing field between online sellers who utilized marketplace platforms and online sellers who utilized social media platforms, as it was harder for tax authorities to enforce taxation regulations on the latter.

Meanwhile, Indonesian Shopping Centers Tenants Association (Hippindo) chairman Budihardjo Iduansjah called on the government to ensure that digital businesses get the same tax treatment as offline retailers, despite the revocation of the e-commerce tax regulation.

“Online marketplace operators should also be required to charge customers’ value added tax according to the prevailing tax law,” said Budihardjo.

Indonesian Retailers Association (Aprindo) vice chairman Tutum Rahanta echoed Budihardjo’s view, saying that he hoped both online and offline retailers receive the same tax treatment to ensure an even playing field.

Finance Minister Sri Mulyani Indrawati recently said the revocation of PMK No. 210/2018 was due to widespread confusion in the public as the government was perceived to be collecting specially designed taxes for e-commerce through the regulation.

“We observed that there was so much noise that was caused by the regulation, which was unproductive considering that there are no new taxes included in the PMK. So we decided to retract the regulation,” said Sri Mulyani recently in Jakarta.

She said the government’s intention was to regulate the collection of information on business players in the e-commerce industry.

Conventional and digital businesses, she emphasized, remain subject to prevailing taxation regulations and therefore should pay their taxes according to current taxation rules.

“If we talk about the taxation obligations, whether they are conventional, digital or [involve] social media, the taxation laws are applicable to all of them,” she said.

She said information needed to be disseminated on the issue as there was a misconception that online-based businesses could avoid paying their taxes.

The growth of Indonesia’s e-commerce industry is among the highest in the world. According to consulting firm McKinsey, the e-commerce market in Indonesia is estimated to grow sharply to a range of between US$55 billion and $65 billion by 2022, a nearly eight-fold increase from $8 billion in 2017.

Center for Indonesia Taxation Analysis executive director Yustinus Prastowo regretted the annulment of the regulation, arguing that the PMK could serve as a clear reference point for digital businesses going forward.

“We regret the annulment of the PMK considering it was already signed and would be useful to serve as guidance for e-commerce players and the tax officials,” said Yustinus, suggesting that the government instead delay the implementation of the regulation to ensure that the stakeholders would be well-informed.

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