Digital Giants Must Pay Their Fair Share for Indonesia

Ambitious Targets on a Fragile Revenue Foundation

President Prabowo Subianto has repeatedly stated Indonesia’s target of 8% economic growth. While ambitious, this goal is not impossible. However, it is crucial to acknowledge that high economic growth requires a robust fiscal foundation; the state cannot be expected to expand its efforts without sufficient revenue capacity.

The fundamental issue is Indonesia’s tax-to-GDP ratio of around 12%, one of the lowest among G20 nations. For comparison, India stands at approximately 20% and Mexico nearly 25%. This indicates Indonesia’s fiscal space remains limited for financing long-term development agendas.

A gaping hole in the digital boom

The question is simple: where will additional revenue come from? The easiest option is raising the burden on those already paying, but this approach is not always fair. The state must expand its revenue base rather than repeatedly tapping the same sources, like hunting in a zoo. Therefore, tax base expansion should be a key policy choice.

Amid these needs, one sector has yet to be optimally tapped: the digital economy. According to the eConomy SEA 2025 report by Google, Temasek, and Bain & Company, Indonesia’s digital economy is projected to reach $99 billion, or approximately Rp1.6 trillion. It is the largest digital market in Southeast Asia and expected to grow at around 14% annually.

Indonesia also has over 230 million internet users with rising penetration rates. It ranks among the top countries globally for social media users, with citizens spending an average of over seven hours daily online for work, study, transactions, and entertainment.

This means Indonesia is no small market; it is a key driver of global digital economic growth. However, a critical question arises: how much of this value truly returns to the state?

The answer remains far from satisfactory. Global digital platforms have largely only acted as collectors of Digital Services VAT. According to Finance Ministry data, Digital Services VAT revenue in 2025 reached approximately Rp10.32 trillion – less than 1% of the national digital economy’s total value.

It is important to understand that VAT is ultimately borne by consumers. Thus, it is Indonesian citizens, not the global digital companies, who are paying. In other words, the contribution has come from the people as service users.

The imbalance that needs correcting

This is where the problem lies. Global digital platforms are reaping enormous profits from Indonesia’s market. In recent years, they have enjoyed extraordinary growth due to the pandemic, technological advancements, and now the AI boom. Yet their direct contributions to state revenue remain disproportionate to the economic value they generate.

This issue is not just about tax; it is about fairness. Meanwhile, domestic digital businesses, local companies, national media, and the telecommunications industry bear different burdens. They pay taxes, absorb labour, build infrastructure, and support the national economy.

For instance, the national media industry faces immense pressure as advertising spending shifts to global digital platforms. Industry data shows most digital ad spending now flows to global platforms, leading to revenue pressures that result in cost-cutting and job losses.

Meanwhile, national telecommunications companies must continually increase digital infrastructure investment. Each year, operators spend tens of trillions of rupiah on network construction and capacity upgrades.

Ironically, global digital platforms benefiting from most digital traffic have no equivalent contribution obligations. If this continues, the result will not be healthy competition but an imbalance in the national digital economy ecosystem.

Progressive solutions: It’s time for Indonesia to be digitally sovereign

Therefore, the state cannot remain a passive observer. The government must prepare more progressive and adaptive policy instruments. One approach to consider is Significant Economic Presence (SEP).

This concept holds that a country has the right to tax companies deriving significant economic benefits from its domestic market, even if they have no physical presence there.

This approach is not new. The OECD, United Nations, and various countries have moved to establish fairer digital tax mechanisms. The UK, France, Turkey, India, and others have taken steps to ensure global digital platforms contribute more proportionately.

Additionally, the government could consider other instruments, such as contributions through Universal Service Obligation to help national internet equity, strengthening obligations