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The Unclarity of Taxation towards Foreign E-Commerce Players in Indonesia

Adjie Priambada - 21 November 2014

Ironic. Despite the fact that e-commerce industry enjoys fruitful growth in Indonesia, the country has yet had a clear yet strict regulation which administers foreign e-commerce players, making them immune to taxes. Considering that more and more foreign players flood Indonesian market today, this is a real deal for the government to handle.

Basically, every payment which goes abroad will be charged according to article 26 of the Income Tax Regulation. However, when it comes to foreign e-commerce companies whose native countries don’t have any tax treaty with Indonesia, the regulation’s effects is nullified.

Kunto Laksito, Income Tax Body II Division’s Head, gives his words about this matter on the Directorate General of Taxes’ official website, “To use the tariff based on the tax treaty, there are several conditions to be met, for example like attaching the Certificate of Domicile along when they want to submit their Notification Letter stating that they are eligible to use the treaty-based tariff due to their status as tax residents of countries which have tax treaty with Indonesia and whose tariff is 20% lower than the one stated in the article 26 of the Income Tax Regulation.”

To support this statement, sub-Directorate of e-Business Interoperability and Inter-connectivity’s Head, Hafni Septiana Nur Endah, added that e-commerce is all about trust. Therefore, buyers are needed to be assured whether the sellers are certified or not.

“Thus when the website owners use certain logo, it’s to assure their customers. But what if the ordered items are not delivered in time? If that’s the case, the Ministry of Communication and Information may assist buyers tracking the delivery if the websites’ domain is dot-id. If it’s dot-com, it’s difficult because the domain is not ours (Indonesian Government),” she added.

Having said that, there are plenty who are ready to enrich the government with suggestions regarding the regulation. What makes it difficult is that e-commerce businesses have crossed boundaries and even countries. Thus, the problem is not only encountered by Indonesia, but also by the global industry as well.

In regard to the issue, Indonesia Internet Data Center’s Chairman Johar Alam told Sindonews, “There’s actually nothing wrong with foreign e-commerce players entering Indonesia. If they intend to do trade, then the government should treat them like traders who are required to pay the tax, regardless on their status as online or offline businesses.”

In line with Alam, economist Faisal Basri stated, “For instance, when I buy Microsoft Office online, does the country get the profit? If I buy the physical CD, the regulation is clear, there’s an income tax being charged. But if it’s online (software download), I guess the government has no right to charge me.”

Above situation does happen.

Thus, sessions of consultation with experts are essential for the government before they can really establish a regulation regarding the online e-commerce industry. In accordance to this, the Ministry of Trade once announced that they had the solution to the problem, which is to partner with software giants. However, although the online e-commerce has been, actually, regulated by the Trade Act Number 7/2004, there are still tons of foreign players being immune to taxes.

It’s time for Indonesia to have a clear regulation on e-commerce, particularly when it comes to foreign invasion. Even so, deep research is fundamental to be done to avoid any possibility of being misled by unproven and illogical statements.

[Header Illustration: Shutterstock]

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