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Jakarta Post

Taxing digital products

  • Editorial board


Jakarta   /   Mon, June 29 2020   /  01:00 am
An activist wearing a mask depicting Facebook CEO Mark Zuckerberg demonstrates outside European Union headquarters in Brussels, Belgium, on Tuesday during the EU finance ministers’ meeting. France and Germany sought on Monday to salvage a proposed EU tax on big digital firms by narrowing the focus to cover only companies’ online advertising revenue. (Reuters/Yves Herman)

The imposition of 10 percent value-added tax (VAT) on digital products provided by tech companies overseas to customers in Indonesia through the electronic trading system as stipulated by Law No. 2/2020 will come into force on July 1. Though Indonesia is taking part in international negotiations under the Organization for Economic Cooperation and Development (OECD) to rewrite global tax rules in response to the rising prominence of tech firms, the government will not wait for a final agreement on the matter, expected later this year.    Faced with a steep decline in tax receipts due to the pandemic-induced economic recession, the government decided to join six other countries in Asia and Europe that have collected such taxes despite the threat of retaliation from the United States Trade Representative. The argument behind the law quite strong. It is imperative to creat...