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Nonsense Myth About Loss on Taxes Because of Online Business

Rama Mamuaya - 6 October 2014

A couple of days ago, I sat on my chair and read an interesting article on Republika, talked about an interview with Dedi Yudiant, the CEO of Cyber Park Indonesia. To me, it seemed that Dedi was not that supportive with e-commerce, as he stated that, “If the Ministry of Trade announced that the total volume of online transaction reaches hundred million of billions of dollars, then we can imagine about the total loss on taxes”.

Incredible yet debatable.

I got lost when trying to understand his statement, but then after analyzing it over and over again, I concluded that apparently Yudiant doesn’t really understand the real concept of e-commerce, or maybe his concept is different with mine. Well, let’s break this down.

For instance, Toko Bagus Online sells millions of different products, and it takes three units of mall to display all of them. “At least, it costs the government one hundred million of billions of US Dollar,” he stated. ~link

I took the pre-mentioned paragraph from Republika, where a number of misconception about e-commerce were there. First, the fact that Tokobagus has been turned into OLX, but that was a common mistake, not that significant. Second, OLX is a marketplace where people post their items there to be sold. In regard to this, William Henley, one of Indonesia’s Internet industry observers, commented, “If we purchase a product at Tokopedia or OLX (marketplace), who should pay the taxes? Tokopedia or OLX? Or the ones who post their items there?”. Referring to Yudiant’s statement we discussed earlier, I assume that he would say Tokopedia/OLX as the one who is responsible for the taxes.

Third, “one hundred million of billions of US Dollar”? Well, let’s hope that it’s just a common editorial error.

Does it make any sense?

Daniel Tumiwa, the Chairman of the Association of E-Commerce Indonesia, gave his words, “All players in Indonesia’s e-commerce have paid their taxes already since they are legal entities as well as legal citizens.”

He (Dedi) said, most of these online businesses are based in Japan, China, Malaysia, Singapore, Thailand, and other countries. Once a deal is sealed, there is a certain tax to be paid and this is what our government has yet benefited from. ~ link

Yes, that IS how it works. Even if we lose the money from those taxes, that is because when our people buy products from global marketplace like eBay, Amazon, or others, the taxes of the purchase will go to the government of the country where the company is located. Question is, how can we lure our people to shop at local platforms if the government over-charges the local e-commerce companies?

“Overall, the total volume of e-commerce transaction is still 5% of the total trade, and the Ministry of Trade understands it best,” Tumiwa added. It doesn’t mean that the e-commerce industry can’t be regulated, but it’s just too complicated to do so since such developing industry would be unique and typical for each country. Tumiwa took US as an example. He said the the country waited for 15 years for its e-commerce industry to grow before finally being able to form and regulate the industry. “However, the government still had meny things to do, including to learn about international trade, for instance when a consumer in New York buy a product from China. In short, same tax no matter where, online or offline,” Tumiwa stated.

It is crucial for the government to look for the correct statistics and information about e-commerce before issuing any regulation. They need also to meet the right and competent talents of the industry, to avoid any possibilities of having one single controversial statement ruining everything. Last but not least, government should also learn deeper before determining which taxing model that is suitable for Indonesia’s e-commerce industry, since adopting other countries’ model would not be a wise option to choose.

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