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Jakarta Post

Indonesia collects $20.9m in digital tax as of October

  • Adrian Wail Akhlas

    The Jakarta Post

Jakarta   /   Tue, November 24, 2020   /   04:04 pm
Indonesia collects $20.9m in digital tax as of October The Finance Ministry’s Taxation Directorate General appointed on Nov. 17 another 10 digital technology companies as VAT collectors, which are obliged to collect 10 percent VAT from the foreign goods and services they sell under the digital tax stipulated in Law No. 2/2020. (Courtesy of Shutterstock/File)

Indonesia has collected Rp 297 billion (US$20.9 million) from 22 digital technology companies under the new digital tax, the Finance Ministry’s Taxation Directorate General said Monday.

The tax office has appointed dozens of technology companies and e-commerce platforms to be value-added tax (VAT) collectors in its efforts to tax digital business activity in the country.

Taxation director general Suryo Utomo expects the 10 percent VAT collected from foreign goods and services sold by tech companies to increase over the next several months as the office aimed to appoint more companies as VAT collectors.

“We have high hopes for November and December as 24 tech firms in November and 36 tech firms in December will start collecting VAT,” he told reporters during a virtual press briefing. “The [collection] outlook will depend on the transaction volume from each appointed collector.”

Read also: Indonesia defends digital tax policy despite US scrutiny

The Finance Ministry’s Taxation Directorate General appointed on Nov. 17 another 10 digital technology companies as VAT collectors, which are obliged to collect 10 percent VAT from the foreign goods and services they sell under the digital tax stipulated in Law No. 2/2020.

The latest additions bring the total number of designated VAT collectors to 46. The newly appointed VAT collectors include Cleverbridge AG; Hewlett-Packard Enterprise USA; SoftLayer Dutch Holdings BV, which operates IBM’s Cloud Service; video game distribution software Steam by Valve Corporation; and video on demand (VoD) and streaming service beIN Sports Asia Pte Limited.

The other five are e-commerce platforms Bukalapak, Lazada, Zalora, Tokopedia and Blibli.com, with the tax office clarifying that e-commerce platforms would collect VAT only from foreign goods and services sold by foreign merchants.

The government has moved to tax digital tech companies with no physical presence in Indonesia but nonetheless have a “significant economic presence” through the business activities they conduct in the country. The decision was made in light of falling tax revenue as well as the growing trend among consumers to shift to online platforms during the COVID-19 pandemic.

Many governments around the world have been pursuing digital tax schemes, primarily to ensure that tech giants pay their fair share of taxes on the local earnings they make.

“This is a part of a policy aimed to ensure a level playing field between conventional businesses and online businesses,” Deputy Finance Minister Suahasil Nazara said during the same briefing, adding that the VAT would create a fair environment for businesses.

Read also: Indonesia taxes tech companies through new regulation

Previously, Taxation Directorate General spokesperson Hestu Yoga Saksama said the office was in discussions with several other digital services providers slated to be the next group of VAT collectors but did not disclose any details.

“We are currently focusing on improving the implementation of the digital tax, as well as on discussions with more foreign digital companies that will be subjected to the tax,” he told the Jakarta Post on Nov. 18.

Institute for Development of Economics and Finance (Indef) economist Bhima Yudhistira projected that the digital goods VAT would contribute less than 10 percent of the Rp 546 trillion VAT collection targeted for next year.

“The tax could also drive consumers to shift from buying goods on e-commerce [platforms] to buying [them] on social media, which is more difficult to tax,” he cautioned.