Indonesia starts taxing Minecraft, Skype, Zoom and Twitter

Indonesia has again extended the list of companies it will require to gather the nation’s digital services tax. The tax was introduced in July 2020 with the express purpose of providing a new source of post-plague revenue for the rapidly-growing but modestly-developed nation. The tax applies to digital services delivered from …

[Anonymous Coward]

Not Just Indonesia...

...other places too have spent the whole kitty on dealing with Corona virus. Letting vast wodges of locally untaxed digital services profit continue to vanish offshore towards the USA is going to be difficult to sustain politically, if the alternative is increasing things like wages tax, consumption tax, etc.

[David Pearce]

Just levelling the playing field

Local companies pay local GST or service taxes and corporation taxes.

The multinationals managed to avoid most of these

[Andy Non]

How would the tax be calculated?

Ten percent on what? Are they proposing that these tech companies monitor the number of adverts sold in Indonesia and charging 10% tax on them? Or are they taxing something else?

[eldakka]

Re: How would the tax be calculated?

Ten percent on what?

Many of the companies on those lists provide subscription-based streaming services, e.g. Netflix. Therefore I'd imagine it'd be 10% of the subscription fee.

But yeah, for those that don't charge a subscription but use advertising ... maybe 10% of the revenue earned from Indonesian customers?

[DS999]

Re: How would the tax be calculated?

It is so easy for the ad based companies to shift things around. If a multinational pays in US to advertise worldwide how much of that fee should be allocated to the customers in Indonesia? If you do it by the percentage of the total, they'll argue that US customers spend more so their eyeballs are more valuable and thereby lowball the revenue from Indonesia. Meanwhile in the UK where the eyeballs are just as valuable as those in the US they'll want to do it by percentage of the total since that's the best way of lowballing it.

At least if a company sells a subscription, or a product, or a service to an Indonesian customer there is no argument about how much they spent and therefore what the tax should be. I predict they will have a lot more hassle trying to get money out of Google and Facebook than they will out of Microsoft and Apple for that reason.

[aki009]

Good luck with that one...

I seriously doubt this tax will bring in more rupiah than its management will consume.

Companies that are domiciled in Indonesia already pay local taxes when required, and would perhaps pay more with more aggressive revenue allocation requirements.

But to levy some sort of nebulous 10% tax on multinationals that are not domiciled in Indonesia will be a loser from day 1. Even if a company wanted to comply paying it, the consumer level will quickly learn that selecting say Malaysia instead of Indonesia as ones claimed home will provide a 10% discount.

Add to that the expected level of company compliance with a poorly thought through tax scheme, and they might as well not have tried.

I'm guessing it's election season in Indonesia, too.

[Anonymous Coward]

Re: Good luck with that one...

> I seriously doubt this tax will bring in more rupiah than its management will consume.

Regardless, tax evading multinationals gain a very large competitive advantage, often as big as the profit the same local company could make. This means that if you are a local with exactly the same costs and sell price, Google/Amazon etc, will still make a good profit, while you are losing money.

Even without tax evasion , US companies are able to make capex without paying the tax they would have to pay on the same investments in the US, or which local competitors pay. This is a signifcant factor making US companies unfairly competitive, and facilitates loss making anti-competitive market invasion.

So even if this makes not a single rupiah, it is beneficial to Indonesia in the long run. And to the rest of us.