Digital Tax Enforcement Adds IDR 10.4 trillion of VAT Revenue

JAKARTA. The implementation of tax on E-commerce ( Perdagangan Melalui Sistem Elektronik/PMSE), as stipulated in Government Regulation in Lieu of Law (Peraturan Pemerintah Pengganti Undang-Undang/Perppu) number 1 of 2020, could increase revenue from the Value Added Tax (VAT) of Rp 10.4 trillion. This amount refers to the results of government studies related to the estimated number of electronic transactions in Indonesia.

The result of the study is contained in academic paper of Perppu number 1 of 2020. The implementation of taxation on E-commerce has changed the concept of taxation on the subject of foreign tax that conducts business in Indonesia using a significant economic presence approach. This is different from the previous approach that uses a physical presence concept.

As quoted from kontan.co.id, in the academic paper there are at least seven business activities in E-commerce, with varying transaction values.

Some of these types of transactions include, transactions on software systems and applications, game transactions, videos and music, movie sales transactions. In addition there are special software transactions such as machinery and design, mobile phone software transactions, broadcast rights and TV subscription services, as well as transactions occurring on social media and over the top services (OTT) with total transaction value reached IDR 104.4 trillion. (see the table)

Number	Type of Transaction	Transaction Amount
1	Software and Application	IDR 14,06 trillion
2	Game, Video, and Music	IDR 880 billion
3	Movie sales	IDR 7,65 trillion
4	Special Software ( machinery and design)	IDR 1,77 trillion
5	Mobile phone software	IDR 44,7 trillion
6	Broadcast rights and TV subscription service	IDR 16,49 trillion
7	Transactions on social media and OTT	IDR 17,07 trillion

This potential number can still be even greater if it calculates Income Tax (Pajak Penghasilan/PPh) which is also targeted by the E-commerce tax provision.  So far there are still many digital companies are still spared from the obligation to pay income tax.

International Tax Disputes 

One possible impact arising from the application of tax on E-commerce is the possibility of increasing international tax disputes. Especially with countries which have tax treaty agreement with Indonesia.

According to Directorate General of Taxes(DGT), as quoted from Bisnis.com, the impact has been calculated. Therefore, if there is any international tax dispute, it can be done through the Mutual Agreement Procedure (MAP) mechanism.

In fact, the decision of the Indonesian government to impose taxation on E-commerce has preceded the Organization for Economic Co-Operation and Development (OECD) and the new G20 which are about to make a consensus by the end of 2020. Related to this, DGT ensured that although in the future OECD and G20 agreed on a different digital taxation concept, Indonesia would follow the global agreement.  (ASP/Ken)