Indonesia Seeking More Tax from Internet Businesses

March 1, 2016 Taxation in Indonesia

Google Mail website screenshotJAKARTA – The government of Indonesia wants more power to tax the activities of large internet businesses, and is threatening these businesses with blockages and slowdowns if they don’t comply.

The Ministry of Communications and Informatics spokesperson of Indonesia Ismail Cawidu has warned large internet companies operating in Indonesia that they may see their sites blocked or access slowed down, if they do not begin paying tax in the country.

Currently, many large internet-based business are not required to pay taxes in Indonesia, as they do not have any physical presence in the country.

However, the government now believes that many of these large businesses should be required to establish either a representative office in the country, or a full permanently established business, which would pay taxes on profits derived from activities in the country.

The government is expected to release new rules in March regarding the need to establish a business presence in the country.

The government estimates that in 2014 alone online service providers saw advertising revenues equivalent to USD 800 million, but only a small fraction of the profits were taxes, as the advertisers did not have a physical presence in the country.

Online social services, messaging, and advertising is widely popular in Indonesia, and it is estimated that the country has the fourth largest number of Facebook users in the world, and approximately 20 million users in Indonesia.

Photo by Spencer E Holtaway