The Government of Indonesia has begun to impose a 10% value-added tax on sales by technology firms including Amazon, Google, Netflix and Spotify. The new VAT tax became effective on July 7 and is part of the governments efforts to address what many companies have said is an inequality that gave international technology companies an advantage over their local competitors who have to pay taxes.
A government spokesman said that as well as addressing the business inequality issue, the government looks at the taxation of international technology companies operating in the country as a new source of revenue.
Indonesia’s tax office said in a media statement that it has already assigned tax identification numbers to Amazon Web Services, Netflix, Spotify and Alphabet's Google for its Google Asia Pacific, Google Ireland and Google LLC units.
Under the new government regulations, all non-resident foreign firms that sell digital products and services in Indonesia, with an annual value of $42,000 USD a year or more, or those firms who internet traffic from at least 12,000 people each year, will be required to pay the 10% VAT.
Hestu Yoga Saksama, a spokesman for the tax office said that the tax office will continue to identify non-Indonesian companies who are effected by the new government policies and that the government will monitor whether these companies are applying for tax numbers and paying their VAT taxes.
According to a study by Google, Temasek Holdings and Bain & Company, Indonesia, the world's fourth most populous country with a population of nearly 270 million, is experiencing a boom in its digital economy that is expected to reach $130 billion USD by 2025.