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Ada Pertanyaan? Hubungi Kami Marcell Sihombing, Sandy Indra Pratama/ANT
Illustration by: BAS
E-commerce has been enjoying exponential growth in recent years and is now one of the key sectors in the Indonesian economy. Unfortunately however, this rapid growth has yet to be complemented by proper systems relating to taxation and other vital areas. Indonesia's new Minster of Finance, Sri Mulyani Indrawati, is adamant that a solution should be found while acknowledging that the thorny issue of e-commerce taxation is basically a global problem for which a definitive solution has yet to be found.
According to Minister Indrawati, the Ministry of Finance (Ministry) is currently working on a suitable solution to the global e-commerce phenomenon, specifically as regards the imposition of taxes upon e-commerce players in accordance with their various business activities. With this goal in mind, the Ministry has already established a team which is currently attempting to formulate an ideal taxation mechanism for online merchants. The review undertaken by the team, as well as any proposals that it comes up with, will eventually become the basis for the issuance of a Ministerial Regulation governing this matter.
“I have already stressed to the team that they should be observing current economic trends and undertaking comparative studies of the regulatory frameworks of other countries, so as to avoid creating an uncompetitive legal framework which will ultimately lead to an inability to collect state revenue effectively [from the e-commerce sector],” Minister Indrawati concluded.
Google in the Crosshairs
Minister Indrawati also ventured an opinion regarding the recent allegation that Google’s Indonesian business unit is not meeting its various national tax obligations. Indeed, the Directorate General of Tax (Directorate General) has been investigating the possibility that tax violations have been committed by business units owned by Google, Twitter, Facebook and Yahoo from April 2016 onwards. It is hoped that this investigation will uncover the potential tax revenues currently being generated in the rapidly expanding information-technology sector.
According to the Directorate General’s findings, Google’s local business unit has been registered as an Indonesian legal entity at the Tanah Abang III Tax Office under the Foreign Direct Investment (FDI) scheme since 15 September 2011, alongside a “dependent agent” affiliated with Google Asia Pacific Pte. Ltd. and based in Singapore. Thus, according to Article 2 (5), Point (N) of the Income-Tax Law, Google’s business unit has already satisfied the various criteria which have to be met by any permanent establishment (Bentuk Usaha Tetap - BUT). Consequently, any revenues which are generated by Google in Indonesia should be subject to income tax.
However, Google’s Indonesian business unit has refused any further tax investigations being undertaken by the country’s tax authorities and, moreover, has not yet declared itself as a BUT. This stance leaves the government with no option other than to enforce more coercive legal measures in the near future.
Commenting on this issue, Minister Indrawati acknowledged that the Ministry’s Directorate General of Tax (Directorate General) had tried its best to enforce the prevailing taxation laws and regulations, as well as to uphold and protect taxpayer rights. In Google’s case, Minister Indrawati then explained that the Income-Tax Law has clearly defined tax objects and subjects, which include BUTs. Moreover, should any party have any objections as regards Indonesia’s taxation framework, the Minister Indrawati suggests that the parties concerned settle their grievances through the tax-court system.
“Both the Directorate General and Google have their own interpretations based on the same regulatory provisions. If both parties agree to disagree, then they can bring their case before a tax court,” Minister Indrawati concluded.
(cd/sp)
Marcell Sihombing, Sandy Indra Pratama/ANT
Illustration by: BAS
E-commerce has been enjoying exponential growth in recent years and is now one of the key sectors in the Indonesian economy. Unfortunately however, this rapid growth has yet to be complemented by proper systems relating to taxation and other vital areas. Indonesia's new Minster of Finance, Sri Mulyani Indrawati, is adamant that a solution should be found while acknowledging that the thorny issue of e-commerce taxation is basically a global problem for which a definitive solution has yet to be found.
According to Minister Indrawati, the Ministry of Finance (Ministry) is currently working on a suitable solution to the global e-commerce phenomenon, specifically as regards the imposition of taxes upon e-commerce players in accordance with their various business activities. With this goal in mind, the Ministry has already established a team which is currently attempting to formulate an ideal taxation mechanism for online merchants. The review undertaken by the team, as well as any proposals that it comes up with, will eventually become the basis for the issuance of a Ministerial Regulation governing this matter.
“I have already stressed to the team that they should be observing current economic trends and undertaking comparative studies of the regulatory frameworks of other countries, so as to avoid creating an uncompetitive legal framework which will ultimately lead to an inability to collect state revenue effectively [from the e-commerce sector],” Minister Indrawati concluded.
Google in the Crosshairs
Minister Indrawati also ventured an opinion regarding the recent allegation that Google’s Indonesian business unit is not meeting its various national tax obligations. Indeed, the Directorate General of Tax (Directorate General) has been investigating the possibility that tax violations have been committed by business units owned by Google, Twitter, Facebook and Yahoo from April 2016 onwards. It is hoped that this investigation will uncover the potential tax revenues currently being generated in the rapidly expanding information-technology sector.
According to the Directorate General’s findings, Google’s local business unit has been registered as an Indonesian legal entity at the Tanah Abang III Tax Office under the Foreign Direct Investment (FDI) scheme since 15 September 2011, alongside a “dependent agent” affiliated with Google Asia Pacific Pte. Ltd. and based in Singapore. Thus, according to Article 2 (5), Point (N) of the Income-Tax Law, Google’s business unit has already satisfied the various criteria which have to be met by any permanent establishment (Bentuk Usaha Tetap - BUT). Consequently, any revenues which are generated by Google in Indonesia should be subject to income tax.
However, Google’s Indonesian business unit has refused any further tax investigations being undertaken by the country’s tax authorities and, moreover, has not yet declared itself as a BUT. This stance leaves the government with no option other than to enforce more coercive legal measures in the near future.
Commenting on this issue, Minister Indrawati acknowledged that the Ministry’s Directorate General of Tax (Directorate General) had tried its best to enforce the prevailing taxation laws and regulations, as well as to uphold and protect taxpayer rights. In Google’s case, Minister Indrawati then explained that the Income-Tax Law has clearly defined tax objects and subjects, which include BUTs. Moreover, should any party have any objections as regards Indonesia’s taxation framework, the Minister Indrawati suggests that the parties concerned settle their grievances through the tax-court system.
“Both the Directorate General and Google have their own interpretations based on the same regulatory provisions. If both parties agree to disagree, then they can bring their case before a tax court,” Minister Indrawati concluded.
(cd/sp)