Indonesia to impose VAT on internet giants from July

According to a regulation published on the website of Indonesia’s Ministry of Finance, the southeast Asian economy will impose a 10 percent vat on digital products sold by non-resident Internet companies, including streaming services, apps and digital games, from July 1st, according to a regulation published on the website of Indonesia’s Ministry of Finance.

Indonesia to impose VAT on internet giants from July

Indonesian authorities have previously said services from streaming platforms such as Spotify and Netflix will be included in the new tax.

Analysts say the outbreak of new crown pneumonia has exacerbated efforts by governments around the world to tax Internet giants. During the global blockade, internet giants’ revenues are likely to increase as people stay at home.

Vasuki Shastry, Asia researcher at the Royal Institute of International Affairs, said: “In the absence of a global digital tax treaty, unilateral measures will prevail. The financial loopholes created by the new corona pneumonia make it impossible to contain. “

Nearly 140 countries from the Organisation for Economic Co-operation and Development (OECD) are negotiating for the first major changes to tax rules to better bring big tech companies such as Amazon, Facebook, Apple and Google to the fore, which are understood to often choose to make a profit in low-tax countries.

At the same time, France has announced plans to introduce a digital tax in 2020.

Despite years of efforts to get internet companies to pay a fair share of their taxes, indonesia announced a vat on value-added tax in March under emergency measures proposed by President Joko Widodo to help the country weather the new coronavirus crisis. The plan was passed by parliament on Tuesday.

Indonesia’s digital economy, with nearly 270 million people, is booming and is expected to reach $130 billion by 2025, according to a study by Google, Temasek Holdings and Bain and Company.

Sri Mulyani Indrawati, Indonesia’s finance minister, has said the VAT on Internet goods is designed to ensure that the government can capture a shift in consumption patterns during the blockade to stem the spread of the virus. She points out that consumers are buying fewer physical goods, but demand for digital products is on the rise.

The government expects revenues to fall by 10 per cent this year, dying from 5 per cent in 2019, due to the new corona virus pandemic and weak commodity prices. The fiscal deficit is also expected to reach 5.07% of GDP by 2020, the highest level in more than a decade.

Hestu Yoga Saksama, a spokesman for Indonesia’s tax office, said on Friday that the finance ministry’s tax department had contacted representatives of companies affected by the value-added tax, but declined to name any of them.

Indonesia’s move is also likely to accelerate the expansion of tax increases in the region. In 2019, Southeast Asian regulators held talks to increase taxes on tech giants across the region.