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Indonesian gov’t wants rules for online merchants to improve tax enforcement

Platforms like Tokopedia and Bukalapak will soon require online sellers to register their identification numbers in a bid to comply with the government’s new rules.

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Indonesian gov’t wants rules for online merchants to improve tax enforcement

As e-commerce numbers continue to grow in Indonesia’s burgeoning online shopping market, authorities are increasingly eager to hold online retailers responsible for paying taxes.

According to Bloomberg today, citing Robert Pakpahan, the director general of taxes of Indonesia’s Ministry of Finance, e-commerce platforms will soon be required to obtain identification numbers from online sellers hawking on their sites, as well as to send a copy of monthly transactions to the relevant agencies.

The startups involved, including Tokopedia and Bukalapak, will not be collecting taxes, he said, adding that the sellers will “perform self-assessment on the arrears”.

In Indonesia, sellers are not limited to online marketplaces, but have, in recent years, conquered social commerce by conducting businesses on social networks like Instagram. Pakpahan admits that enforcing these rules with informal sellers on social apps won’t be as “easy”, and that these activities won’t be targeted by the new measures for the time being.

Takeaways:

— Businesses in Indonesia’s large informal sector, including many of the micro- and small businesses that are now coming online, have traditionally operated outside of the tax system.

— With e-commerce, their sales volumes and revenue becomes transparent, and the tax office has seen this as an opportunity to turn more SME into tax-paying entities. There was an attempt to aggregate e-commerce transaction volumes from e-commerce platforms into an official measure for the state of Indonesia’s digital economy, however, this effort seems to have stalled (link in Indonesian). Exchanging data with e-commerce upstarts will can help authorities gain more clarity over what taxes they’re missing out on. Of course, tight scrutiny might result in a dip in the number of online sellers using e-commerce platforms such as Bukalapak and Tokopedia.

— Countries where e-commerce has been extremely successful – like the US and China – have seen intense debates over the question if vendors on such marketplaces should be paying taxes on their online income. In China, for instance, the government passed a law in August ruling that in 2019, online sellers on sites like Taobao must pay taxes on sales made via these marketplaces.

Editor: Nadine Freischlad