Indonesia demands global Internet firms pay local tax, or be blocked
INDONESIA has sent a strong message to international Internet-based companies which provide services in the country.
Government officials said today that all online services are required to have an enduring local footprint – a representative office or full-fledged company – and pay taxes.
“All have to create a permanent establishment, like the contractors for the oil sector, so they can be taxed,” said Finance Minister Bambang Brodjonegoro, according to Reuters, without mentioning specific online companies.
Indonesia’s Communication Ministry intends to announce new rules in March that would be applicable to a whole host of online media – from social media websites to streaming and messaging services.
Noncompliance will result in lower bandwidth or possibly a complete block, a ministry spokesperson said.
It is clear that the government wants a piece of the pie. It put digital advertising in Indonesia at about $800 million last year – which went untaxed due to regulation loopholes.
While Google is a legal entity in Indonesia, Facebook and Twitter only maintain representative offices in the country.
That may not be enough.
Communication and Information Minister Rudiantara said last Friday that firms like Facebook and Twitter are obligated to have a legal entity and permanent business status.
“It comes back to concerns regarding consumer protection and leveling the playing field. We need to know what happens with the data they send outside of Indonesia and we also wish to allow Indonesia to be more competitive in the global market,” he told the Jakarta Post.
There is a crucial tax rationale behind such a rule. Only companies that have their own local entities are required by law to pay taxes.
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