Indonesia sets sights on Netflix, Zoom digital tax to boost economy amid COVID-19 pandemic

File photo of remote control against backdrop of television screen with Netflix on. Photo: Andrés Rodríguez
File photo of remote control against backdrop of television screen with Netflix on. Photo: Andrés Rodríguez

Your Netflix subscription is about to get a little pricier as the government has set its sights on taxing digital companies and services that may or may not have a legal entity in Indonesia.

On March 31, President Joko Widodo issued a Perppu (government regulation in lieu of law) aimed at stabilizing the economy amid the COVID-19 pandemic. One of the articles in the Perppu mandates that the government will collect tax from foreign digital companies that have a significant economic presence in Indonesia.

A Perppu comes into effect 30 days after it’s signed unless Parliament approves it before then, in which case it becomes law; or rejects it, in which case the government will have to present a revised Perppu.

The Perppu states that the government may block services provided by these digital companies if they fail to pay taxes in Indonesia.

“I know that [during the COVID-19 pandemic] many people have turned to streaming, and we see many taxable transactions in the digital sector, so we need a regulation to collect tax from these foreign platforms. Tax subjects like Netflix and Zoom have no [legal] presence in Indonesia but everybody uses them,” Finance Minister Sri Mulyani said yesterday, as quoted by CNBC Indonesia.

Kompas reported that the government will impose a 10 percent tax on subscription fees for the likes of Netflix and Spotify. If such a policy were to pass, Netflix’s subscription plan in Indonesia would range from IDR53,900 to IDR185,900 from the current IDR49,000 to IDR169,000. 

The government has been eyeing tax money from over-the-top (OTT) media services for years, but taxing companies with no permanent establishment in the country has proved tricky before.

Maybe this is a good time to unblock Netflix for the millions of customers of state-owned telco Telkom? After all, more subscribers means more tax income. That’s what we call a win-win.

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