Want to stay operational in Indonesia? Gotta pay those taxes. On Monday, government officials in the southeast Asian country announced that Internet-based companies will risk service blockage unless they obtain “permanent establishment” status and pay Indonesian taxes. According to Finance Minister Bambang Brodjonegoro, any and all Internet-based service providers are required to maintain a local presence, either by way of a local office or a headquarter office in order to access the Indonesian market.
“All have to create a permanent establishment, like the contractors for the oil sector, so they can be taxed,” said Brodjonegoro, though he did not specify which companies would be affected by the new regulations.
In addition to the mandate from the Finance Minister, Communications Ministry spokesman Ismail Cawidu noted that new rules would be implemented regarding streaming and messaging providers in March. Social media websites will also be impacted at that point.
The implications of this new suite of laws could be significant, as the Indonesian population makes up a significant chunk of both Google and social media sites’ user bases. In fact, Reuters reports, “The country is considered Twitter’s capital and is home to the world’s fourth-largest number of Facebook users.”
As such, the threat of reduced bandwidth or complete blockage is a serious one for tech companies. The Indonesian government estimates that some $800 million in digital advertising revenue was generated last year, and due to tax loopholes, the country failed to benefit at all from this significant sum. Now, officials say, they’re finally looking to clean things up.
Ultimately, officials say, it’s about protecting their citizenry. “It comes back to concerns regarding consumer protection and leveling the playing field,” Communication and Information Minister Rudiantara told the Jakarta Post. “We need to know what happens with the data they send outside of Indonesia and we also wish to allow Indonesia to be more competitive in the global market.”
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