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View all search resultsAnalysis: Turning marketplaces into tax collectors
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A customer shops on the Tokopedia online market place on his mobile phone on May 4. (Antara/Puspa Perwitasari)
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tarting Aug. 1, four of the country's largest marketplaces - Tokopedia, Shopee, Lazada and Blibli - will begin withholding income tax directly from qualifying merchants' sales, replacing the long-standing self-assessment system. By turning digital platforms into tax collectors, the government hopes to improve compliance. The challenge is whether it can formalize the digital economy without discouraging the small businesses that drive its growth.
The reform is anchored in Finance Ministry Regulation (PMK) No. 37/2025, which establishes a new collection mechanism for Article 22 Income Tax (PPh Pasal 22) on domestic merchants selling through e-commerce platforms.
The regulation does not create a new tax or alter existing tax rates. Instead, it authorizes the Directorate General of Taxes (DJP) to appoint eligible marketplaces as withholding agents responsible for collecting, remitting and reporting taxes on behalf of merchants. Under the regulation, online sellers with annual turnover between Rp 500 million (US$28,500) and Rp 4.8 billion are subject to a final income tax of 0.5 percent.
The challenge is that the reform does not come in isolation. It follows a series of regulatory changes affecting online merchants, including Trade Ministry Regulation No. 19/2026 and Medium, Small and Micro Enterprise (MSME) Ministry Regulation No. 3/2026, which require all online sellers - including micro enterprises - to obtain a Business Identification Number (NIB), as well as Government Regulation No. 20/2026, which removes the preferential 0.5 percent final income tax facility for certain business entities.
Each measure pursues a legitimate policy objective, from strengthening business formalization to improving tax administration. Taken together, however, they significantly increase the compliance burden facing the very MSMEs that have driven Indonesia's digital commerce boom.
To be fair, the government is correct in emphasizing that the new Finance Ministry regulation neither introduces a new tax nor raises existing tax rates. The more pressing issue is not the size of the levy, but the cumulative cost of compliance. Online merchants already bear marketplace commissions, service charges, advertising fees and other platform costs that can exceed 20 percent of each transaction.
Adding new administrative requirements - even those intended to simplify tax collection - risks reinforcing the perception that operating within the formal marketplace ecosystem is becoming increasingly burdensome. If the costs of compliance begin to outweigh the benefits of formalization, some smaller merchants may shift transactions to social commerce platforms or offline channels instead, undermining the very objective of expanding Indonesia's formal digital economy.
