Commission XI of the House of Representatives (DPR) and the\ngovernment have agreed on the Macroeconomic Framework and Fiscal Policy\nPrinciples for the 2027 State Budget Draft (RAPBN). One agreed target is\na state revenue ratio of at least 12.01 percent of Gross Domestic\nProduct. This target is not easy. Therefore, the government must\ncarefully determine the direction of state revenue policy so as not to\noverly burden the wider public, especially micro, small, and medium\nenterprises (UMKM) that are still facing economic pressures. Every time\nthe state revenue target rises, the targets should not be ordinary\ncitizens and domestic businesses struggling to survive. The state must\ndare to broaden the tax base to sectors that have long enjoyed\nIndonesia\u2019s vast market but whose tax contributions remain minimal,\nnamely global digital companies.<\/p>\n
In her speech, the Minister of Finance also emphasised the importance\nof aligning the national tax system with the development of the digital\neconomy and global taxation. This is a precise step, because the reality\nis that the digital economy is evolving far faster than our tax\nregulations. Today, global digital companies dominate almost the entire\ndigital ecosystem. They control user data, digital advertising,\nalgorithms, and the monetisation of public activity. Ironically, the\nenormous profits they reap from the Indonesian market are largely not\nrecorded as taxable income in Indonesia. Instead, it is the Indonesian\nconsumers who bear the tax.<\/p>\n
Since 2020, Indonesia has indeed implemented Value Added Tax on Trade\nThrough Electronic Systems (PPN PMSE). However, it must be understood\nthat this VAT is essentially charged to consumers, not to the digital\nplatform companies themselves. So, those paying the tax are housewives\nsubscribing to streaming services, students buying applications, UMKM\nactors placing digital advertisements, and the public using app-based\nservices daily. Meanwhile, global digital companies continue to enjoy\nmassive profits without equivalent income tax obligations in\nIndonesia.<\/p>\n
This situation is actually similar to the practice of under-invoicing\nthat the President once highlighted. The difference is that if leakage\npreviously occurred in the goods trade sector, now it is happening in\nthe digital economy. The state struggles to ascertain the true economic\nvalue because transaction data and profits are recorded in other\njurisdictions. Yet the economic value generated from Indonesian users is\nenormous. With over 230 million internet users and a population of\naround 270 million, Indonesia is a highly tempting market for global\ndigital companies. They derive extraordinary economic benefits from the\nactivities of Indonesian society, but their contribution to state\nrevenue remains far from optimal.<\/p>\n
Therefore, it is time for Indonesia to dare to abandon the old\napproach that relies solely on the concept of Permanent Establishment.\nUnder the old regime, a company could only be taxed if it had a physical\npresence such as an office, assets, or employees in Indonesia. In the\ndigital era, companies can earn trillions of rupiah in profit without\nopening a single metre of office space in the country where they\noperate. The world has changed, so tax regulations must not be left\nbehind. Many countries have begun implementing the concept of\nSignificant Economic Presence (SEP). This concept affirms that digital\neconomic activity generating substantial profits in a country should\ncarry tax consequences there, even if the company has no physical\npresence. Countries like the United Kingdom, France, Italy, and Turkey\nhave already adopted this approach using various indicators such as the\nnumber of active users, transaction values, or the global revenue scale\nof digital companies.<\/p>\n
On the other hand, domestic companies continue to be the backbone of\nstate revenue through corporate income tax. They pay taxes, create jobs,\nface economic pressures, and simultaneously support the state budget.\nYet global digital companies that enjoy the Indonesian market on a\nmassive scale still escape equivalent obligations. This clearly creates\nan imbalance. We cannot continue to allow Indonesia\u2019s digital economy to\nbecome a profit field for global tech giants without the state daring to\nclaim a fair share for the national interest. Indonesia needs an\nadaptive, modern, and fair tax system. The state must be present to\nprotect national interests amidst very rapid changes in the global\neconomy. The Indonesian people should not merely become a market, a\nsource of data, and consumers, while the economic added value flows\nabroad without adequate contribution to the nation. Ultimately, digital\nsovereignty is not just about technology. Digital sovereignty is also\nabout the state\u2019s courage to ensure that every large profit generated\nfrom the Indonesian people must return, in part, to finance Indonesia\u2019s\ndevelopment. Otherwise, we will only become a large nation with a large\nmarket, but whose economic value is enjoyed by other countries. The\nIndonesian people buy, use, generate data, and even become advertising\ntargets every day, yet the trillions of rupiah in profits are recorded\noverseas, while the state is busy collecting taxes from its own people.\nIt is time for Indonesia to stop being merely a digital market for the\nworld. The state must be present, sovereign, and courageous in claiming\nits rights for the sake of national interest and economic justice for\nall Indonesian people.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/digital-giants-significant-economic-presence-must-be-taxed-fairly-1782197666", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }