Indonesia Supports International Cooperation

AFP/GETTY IMAGES NORTH AMERICA/JUSTIN SULLIVAN

The Facebook logo is displayed during the F8 Facebook Developers conference in San Jose, California, April 30, 2019. Google and Facebook Indonesia have not given any comment on Indonesia’s tax policy on global technology companies.

JAKARTA, KOMPAS — Tax policies on global technology companies conducting online transactions in Indonesia should be based on where the services are sold rather than where the companies are based. The implementation of the tax system should be based on international cooperation.

At a meeting in Fukuoka, Japan, on Saturday, finance ministers of the G-20 countries agreed to formulate taxation rules for giant technology companies, which have used loopholes to reduce their tax payment, such as by basing their operations in a country with lower taxes, even though most of their customers are not in that country.

During a hearing with the budgetary committee of the House of Representatives (DPR) in Jakarta on Tuesday, Finance Minister Sri Mulyani Indrawati said tech giants like Google, Facebook, Amazon and Netflix were difficult to tax, because they were not based in Indonesia, although they made money from customers in Indonesia.

KOMPAS/MEGANDIKA WICAKSONO

One of the rooms of the Asia Pacific office of Facebook in Singapore, as seen on Tuesday (13/11/2018). Google and Facebook Indonesia have not given any comment on Indonesia’s tax policy on global technology companies.

As a result, the government failed to take advantage of a potential source of state revenue, the minister said. According to Sri Mulyani, Indonesia is engaging with the G-20 forum to set up international tax cooperation and improve transparency in taxation at the global level.

Darussalam, managing partner of the Danny Darussalam Tax Center (DDTC), said that, based on the international taxation mechanism, global digital companies could be taxed only if they had established a business entity.

The Indonesian government, through Finance Ministry Regulation No. 35/2019, requires foreign companies operating in Indonesia to establish business entities in the country and obtain a tax identification number (NPWP).

He said that regulation was not effective, because it was considered only a local legal product. Therefore, the solution should be based on international cooperation, he added.

Representatives of Google and Facebook in Jakarta declined to comment on the G-20 group\'s digital tax initiative.

KOMPAS/IWAN SETIYAWAN

An invited guest signs the wall at a Google Indonesia launch in Jakarta on Friday (30/3/2019). Google and Facebook Indonesia have not given any comment on Indonesia’s tax policy on global technology companies.

Meanwhile, Indonesia\'s executive director of the Information Communication Technology Institute, Heru Sutadi, said Indonesia needed to establish a strategic policy to take advantage of the rapidly growing digital economy in the country, so that it would not just be a market of consumers.

In its June 6, 2019, report on Indonesia, the World Bank states that the digital revolution brings many benefits to the Southeast Asian country, but the country still requires a lot of work to optimize such benefits.

The World Bank’s director for digital development, Boutheina Guermazi, said the adoption of digital technology among businesspeople and the government was still low. Regulatory bottlenecks and a lack of trust in electronic transactions could hinder the growth of the digital economy.

(MED/JUD)