Finance Minister Sri Mulyani Indrawati — often the face of the government’s tax collection drive — has set her sights on digital companies to pay taxes if they provide services in Indonesia, with Netflix the center of the focus.
Speaking to the media yesterday, Sri Mulyani said the government is preparing tax law reforms in order to get digital companies to pay taxes in Indonesia even if they are not registered as a permanent establishment in the country.
“In the law, we propose that digital economy [entities] that have no permanent establishment but still have many activities [in Indonesia] be mandated to pay taxes because they have significant economic presence,” Sri Mulyani said, as quoted by CNBC Indonesia.
The former managing director of the World Bank did not specify in depth what the tax law reforms would entail, or when it could be passed.
However, Sri Mulyani did refer to Australia and Singapore as countries that have decided to tax digital services like Netflix. In Singapore’s case, Parliament last year passed an amendment to their Goods and Services Tax (GST) to include online services, which will come into effect in January 2020.
In Australia, The Australian Financial Review this week reported that Netflix paid only $341,793 in tax for the 2018 calendar, which is the equivalent of 0.06 percent of the lowest estimate of its Australian income. The report found that Netflix manages to circumvent paying higher taxes as it uses “a corporate structure which allows a Netherlands-based subsidiary to recognize the hundreds of millions of revenue earned” in Australia.
Separately, newly-appointed Communications and Information Minister Johnny G Plate said that the government will focus on collecting tax from overseas digital companies, and that the ministry may summon representatives from Netflix to determine whether or not the video streaming platform is fulfilling legal requirements in Indonesia.
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