Jakarta. Indonesia has not reacted to United States President Donald Trump's plan to begin investigations into digital service taxes in several countries, which may lead to a trade retaliation from the US government.
The Finance Ministry has confirmed Indonesia would start collecting a 10 percent value-added tax on foreign digital services, including popular American streaming services such as Spotify and Netflix, on July 1.
On Tuesday, the office of the United States Trade Representative (USTR), said it had begun investigating digital service tax proposals from the European Union, Austria, Brazil, Czech Republic, India, Italy, Spain, Turkey, the United Kingdom and Indonesia.
Febrio Kacaribu, the head of the Finance Ministry's Fiscal Policy Agency (BKF), said the government has not made any comment on the investigation due to the sensitive nature of the issue.
"In regards to [recent news on] the digital service tax, we have yet to release a statement, but hopefully soon because this is a strategic matter," Febrio said in a teleconference on Thursday.
Indonesia is now in a negotiation with the US to keep the archipelago's exports in the Generalized System of Preferences scheme – trade incentives the US gives to developing countries.
The GSP helps $2 billion worth of Indonesian exports, or 11 percent of its total exports to the US, remain competitive.
The government will make an announcement once it has decided on how to handle the US move, Febrio said.
The regulation for the 10 percent VAT on digital services was issued in May as the government sought to increase tax revenue and find extra funding for its $25 billion Covid-19 stimulus.
USTR head Robert Lighthizer said the digital services tax is unfairly targeting US companies.
"President [Donald] Trump is concerned that many of our trading partners are adopting tax schemes designed to unfairly target our companies," Lighthizer told the Wall Street Journal.
"We are prepared to take all appropriate action to defend our businesses and workers against any such discrimination," he said.
The investigation would likely result in tariffs against the US' trading partners, according to the Wall Street Journal report, even though it is not yet determined what goods would be slapped with tariffs and how large they would be.