Digital Entrepreneurs to Become Subject to Tax

 
Ricky Pratomo, Fitri Novia Heriani
 

 

Originally designed in order to connect people across the globe, social media sites such as Facebook, Google, YouTube, Instagram and Twitter have more recently become a platform for commercial trading, an area which is generally known as e-commerce. This new platform has rapidly become a highly popular way of doing business, as users can easily process and follow their transactions, from the promotion of their goods or services through their social media of choice, through the accepting of orders and accepting payment transfers, right up to the point of delivery. In addition, social-media users can also generate income by endorsing particular products on their social-media sites.
 
These new business activities have now caught the attention of the authorities, including the Directorate General of Tax (Directorate General), which is currently reviewing plans to impose taxes upon any commercial activities which are undertaken digitally through social media.
 
Hestu Yoga Saksama, Director of Counseling, Service and Public Relations at the Directorate General, recently stated that his division was currently discussing details of a mechanism for the imposition of taxes upon digital entrepreneurs. Once this mechanism has been finalized, the Directorate General will collect the relevant taxes either from social media or directly from the entrepreneurs in question.
 
“All income has to be taxed. So in the event that I receive income from advertisements because I have a popular YouTube channel which has many viewers, then I should report this income in my annual tax report (surat pemberitahuan pajak). [Not only advertisements but] any income which is generated through e-commerce activities should also be reported annually,” Mr. Saksama explained at a media gathering which was held by the Directorate General in Malang on Thursday, 13 October, 2016.
 
Mr. Saksama went on to state that the Directorate General would not be introducing any new types of taxes however, as the tax objects which relate to these new digital business activities can be covered by the already existing taxation regimes, specifically income tax and value-added tax. Nevertheless, Mr. Saksama has emphasized that the Directorate General should focus on the imposition mechanism, specifically the self-assessment mechanism, which will require thorough supervision.
 
“The problem is that not everyone understands how the imposition of taxes works. [Therefore], it is possible to establish a new supervision mechanism under one regulation in order to discipline taxable entrepreneurs,” Mr. Saksama explained.
 
Mr. Saksama went on to urge all stakeholders who benefitted from social media, both in terms of e-commerce activities or endorsement services, to report their incomes. Indeed, such incomes are not listed as non-taxable income (penghasilan tidak kena pajak), so Mr. Saksama is encouraging digital entrepreneurs to utilize the tax-amnesty program.
 
“We will keep trying to implement a more thorough supervision mechanism. Hopefully, in the future, we will be able to figure out incomes more accurately and thus the relevant taxes which are to be imposed. Digital entrepreneurs would currently be best advised to submit annual tax reports through the tax-amnesty program rather than calculating their annual incomes and taxes by themselves. By joining the tax-amnesty program, they will only be required to pay ransom fees amounting to 3% of their assets,” Mr. Saksama suggested.
 
Also commenting on this issue, Yustinus Prastowo, a tax analyst, confirmed that digital entrepreneurs were indeed taxable subjects. However, the primary problem is finding a mechanism suitable for the collection of any such taxes. By way of example, Mr. Prastowo referred to the case of someone who is asked to endorse a product and who then receives a payment for this endorsement. In this context, Mr. Prastowo questioned if such activity actually falls under the scope of the current taxation regime or whether a more suitable treatment would be to come up with a special arrangement for any such income which is generated by a one-time endorsement.
 
“Moreover, do these Instagram and YouTube celebrities understand the self-assessment mechanism, which requires that they calculate their own taxes? I believe that most will not meet their tax obligations, especially in light of the currently widespread assumption that e-commerce is a non-taxable area,” Mr. Prastowo explained.
 
Mr. Prastowo subsequently admitted that the collection of taxes from individuals was a far more complicated process than collecting taxes from corporations. In this context, Mr. Prastowo then suggested two measures which could be taken by the Directorate General in order to collect the relevant taxes from digital entrepreneurs.
 
Firstly, the government should impose taxes upon the platforms that their revenue is built upon, such as Instagram and YouTube, and treat them as corporations which receive advertising revenues. Secondly, with regard to Google and its peers, the government can collect taxes from payment gateways. If these payments are being made through credit cards, such as Visa or Master Card, then the government can collect taxes from these sources.
 
“If (social media) partner up with banks, then the banks should ask them to register as taxable entrepreneurs. Therefore, (the government) should not bother about whether any such advertising revenues are ultimately transferred to certain individuals. Just so as long as YouTube and Google receive a portion of the revenue which is generated through any such advertising, then the government may collect taxes from them directly or from their payment gateways, according to the valid tariffs. This method also applies to applications such as App Store and Google Play, which claim to be non-taxable entrepreneurs, thus the government should (collect taxes) from these gateways,” Mr. Prastowo stated.
 
Ultimately, Mr. Prastowo suggested that the extreme measure of blocking any social-media sites which are not willing to pay taxes or register their companies in Indonesia could be implemented by the government.
 
(cd/sp)