Indonesian online marketplace, which counts China's Ant Financial among its minority investors, expects to break even in three years, as it adds new product segments and expands coverage in small towns, a top executive said. (JG Photo/Dion Bisara)

Gov't Cracks Down on E-Commerce to Raise Tax Collection


JANUARY 14, 2019

Jakarta. The Ministry of Finance said on Monday that it will impose new rules requiring e-commerce sellers to share data with the authorities, while also stressing that they must pay taxes.

Surging smartphone use and a rising middle-class income in Indonesia, home to 260 million people, has made its e-commerce industry a battleground for foreign investors.

Global consultancy McKinsey projects spending in the Indonesian e-commerce market to rise to as much as $65 billion by 2022, from $8 billion last year, similar to the growth trajectory experienced in China between 2010 and 2015, and the government is trying to squeeze more from a market that traditional retailers have alleged avoids taxes.

From April, all operators of online marketplaces will have to detail each seller's turnover and report this to the authorities, the ministry's tax spokesman Hestu Yoga Saksama said.

The rules would apply to all online marketplace operators in Southeast Asia's largest economy, including Lazada and Tokopedia, which are both backed by Chinese e-commerce giant Alibaba, and Bukalapak, which counts China's Ant Financial among its investors.

The Directorate General of Taxes said an online seller that makes at least Rp 4.8 billion ($340,000) in turnover must charge value-added tax to customers and pay this to the authorities.

A seller must also pay income tax of 0.5 percent of turnover if it is a small or medium business, or a 25 percent corporate tax of profit if it is big enterprise, bringing the sector in line with requirements for conventional retailers.

There were no new taxes being applied, but the rules were put in place to clarify what taxes each player in a marketplace is obliged to pay and to "create an equal treatment with conventional businesses," the tax office said.

The Indonesian E-Commerce Association (idEA) criticized the new rules, saying online sellers would instead choose to sell their products through social media, CNBC Indonesia reported.

Tokopedia and Bukalapak both said they are still studying the possible impacts caused by the rules.