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Indonesia wants to charge VAT to digital giants

2019-09-04T06:32:13.200Z

Indonesia wants to charge VAT to digital giants



Jakarta (AFP)

Indonesia wants to charge value-added tax (VAT) to digital giants like Google, Amazon or Netflix, Indonesian Finance Minister Sri Mulyani Indrawati said late Tuesday.

Even if these companies "do not have a representative office in Indonesia", which allows them to escape the taxes in force on companies, "their tax obligations exist anyway", it is argued in a statement published on the government website.

These technological companies "have what is described as a significant or very significant economic presence even if they do not have a permanent office or establishment here," said the minister quoted in the text.

A new law drafted by the Indonesian Ministry of Finance provides that "digital companies, including international companies like Google, Amazon and Netflix, will now be able to collect VAT" and pay it to the Indonesian authorities.

The VAT rate is currently 10% in Indonesia.

The minister also confirmed that the tax rate of companies on the territory should drop from 25% to 20% in 2021, a measure designed to stimulate growth in a global context of economic slowdown due to trade tensions.

The low tax rate of the digital giants, who have developed sophisticated tax optimization techniques and often do not have permanent offices in their main markets, is denounced by a growing number of countries.

The OECD has been working for a number of years on tax reform that is better adapted to the digital economy but has not yet reached an applicable consensus.

France has adopted this summer the so-called "Gafa" tax that relates to the turnover of the digital giants, triggering a wave of protest from these actors and US authorities.

With more than 260 million inhabitants, the Indonesian e-commerce market is an attractive and growing market. It has been estimated at $ 8 billion in 2018 by McKinsey Global Institute.

The Indonesian tax authorities had started a procedure for tax evasion against Google, believing that the American giant had not paid all the taxes it owed in 2015. The deal ended with an agreement out of court whose financial terms have not been disclosed.

© 2019 AFP

Source: france24

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