Jakarta demands tax from internet giants

Indonesia’s young population is spending an increasing amount of time online. Source: Pixabay

Internet giants could have their services blocked in Indonesia if they do not obtain “permanent establishment” status and pay tax, Jakarta has announced.

Finance Minister Bambang Brodjonegoro told the media that online services must have a representative office in the archipelago or a fully fledged company.

“All have to create a permanent establishment, like the contractors for the oil sector, so they can be taxed,” he said.

Communications Ministry spokesman Ismail Cawidu said his ministry wanted to regulate streaming, messaging providers and the social media.

Indonesians are huge users of Google and social media sites. Twitter is very popular and it has the fourth-largest number of Facebook users.

Indonesia’s large, young population was estimated to have 82 million social-network users this year, up 13.5 per cent from last year, according to eMarketer. Facebook is the most popular social network.

Cawidu stressed the need to make multinationals pay taxes and Jakarta’s desire to monitor terrorist activity and pornography to justify the legislation that is expected next month.

The government is looking for new tax revenue streams to fund massive infrastructure projects and social development programmes.

Jakarta was threatening to reduce bandwidth or block providers that do not comply, Cawidu said.

“They have massive customers in Indonesia… If someone places an ad in Google, what do you think we get?” he said.

His ministry valued the nation’s digital advertising at about US$800 million in 2015 although it was largely untaxed because of legal loopholes.

Google is now an Indonesian legal entity and Facebook and Twitter have representative offices.

The communications minister Rudiantara promised greater tax scrutiny.

“Google has an office in Indonesia but digital age transactions do not go through that office. That is what we’re looking to straighten out,” Rudiantara said.

This month Jakarta announced that all instant-messaging providers, including Line, Twitter and WhatsApp, should remove gay emoticons which were seen as incompatible with the diverse nation’s cultural norms and ethics. New York-based Human Rights Watch wrote to President Joko Widodo complaining about the weak position of lesbian, gay, bisexual, and transgender people in the largely Muslim society. The government also blocked micro-blogging site Tumblr for distributing pornographic content.

Google, Facebook and Twitter were unavailable to comment.