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Indonesia to join global quest for digital tax unity
Indonesia's new omnibus bill on taxation is to include a tax policy for digital companies, whether or not they have a permanent establishment (PE) in the country.
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The Directorate General of Taxation on Jl. Gatot Subroto in Jakarta has a distinctive iconic architectural style. (kontan.co.id/File)
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inance Minister Sri Mulyani Indrawati said on Wednesday that the omnibus bill would contain a mechanism to ensure that digital companies fulfilled their tax obligations without changing existing tax provisions, such as a new requirement on value-added tax.
The omnibus bill on taxation is to include a digital tax policy that taxes all digital companies doing business in Indonesia, even if they do not have a physical presence in the country.
Speaking during a panel discussion at the Mandiri Investment Forum in Jakarta, the minister explained that the bill needed to address digital taxation because of the significant development of the digital economy and tax laws that had yet to catch up with the new business model.
Digital companies like Google, Facebook, Netflix and Spotify were subject to “fair taxation”, even though they did not have permanent establishments in the country, the minister said.
But, Sri Mulyani assured that the government did not want to create an unnecessary burden with the new tax policy that could potentially kill the industry.
“We see a lot of potential in the digital economy,” she said.
The omnibus bill on taxation would also include tax provisions and facilities to strengthen the economy. One of the bill's most important points is a planned reduction in the corporate income tax rate to a maximum 20 percent from the current 25 percent. The tax rate would be reduced in stages from 2021 through 2023.
