Digital Giants' Significant Economic Presence Must Be Taxed Fairly

Commission XI of the House of Representatives (DPR) and the government have agreed on the Macroeconomic Framework and Fiscal Policy Principles for the 2027 State Budget Draft (RAPBN). One agreed target is a state revenue ratio of at least 12.01 percent of Gross Domestic Product. This target is not easy. Therefore, the government must carefully determine the direction of state revenue policy so as not to overly burden the wider public, especially micro, small, and medium enterprises (UMKM) that are still facing economic pressures. Every time the state revenue target rises, the targets should not be ordinary citizens and domestic businesses struggling to survive. The state must dare to broaden the tax base to sectors that have long enjoyed Indonesia’s vast market but whose tax contributions remain minimal, namely global digital companies.

In her speech, the Minister of Finance also emphasised the importance of aligning the national tax system with the development of the digital economy and global taxation. This is a precise step, because the reality is that the digital economy is evolving far faster than our tax regulations. Today, global digital companies dominate almost the entire digital ecosystem. They control user data, digital advertising, algorithms, and the monetisation of public activity. Ironically, the enormous profits they reap from the Indonesian market are largely not recorded as taxable income in Indonesia. Instead, it is the Indonesian consumers who bear the tax.

Since 2020, Indonesia has indeed implemented Value Added Tax on Trade Through Electronic Systems (PPN PMSE). However, it must be understood that this VAT is essentially charged to consumers, not to the digital platform companies themselves. So, those paying the tax are housewives subscribing to streaming services, students buying applications, UMKM actors placing digital advertisements, and the public using app-based services daily. Meanwhile, global digital companies continue to enjoy massive profits without equivalent income tax obligations in Indonesia.

This situation is actually similar to the practice of under-invoicing that the President once highlighted. The difference is that if leakage previously occurred in the goods trade sector, now it is happening in the digital economy. The state struggles to ascertain the true economic value because transaction data and profits are recorded in other jurisdictions. Yet the economic value generated from Indonesian users is enormous. With over 230 million internet users and a population of around 270 million, Indonesia is a highly tempting market for global digital companies. They derive extraordinary economic benefits from the activities of Indonesian society, but their contribution to state revenue remains far from optimal.

Therefore, it is time for Indonesia to dare to abandon the old approach that relies solely on the concept of Permanent Establishment. Under the old regime, a company could only be taxed if it had a physical presence such as an office, assets, or employees in Indonesia. In the digital era, companies can earn trillions of rupiah in profit without opening a single metre of office space in the country where they operate. The world has changed, so tax regulations must not be left behind. Many countries have begun implementing the concept of Significant Economic Presence (SEP). This concept affirms that digital economic activity generating substantial profits in a country should carry tax consequences there, even if the company has no physical presence. Countries like the United Kingdom, France, Italy, and Turkey have already adopted this approach using various indicators such as the number of active users, transaction values, or the global revenue scale of digital companies.

On the other hand, domestic companies continue to be the backbone of state revenue through corporate income tax. They pay taxes, create jobs, face economic pressures, and simultaneously support the state budget. Yet global digital companies that enjoy the Indonesian market on a massive scale still escape equivalent obligations. This clearly creates an imbalance. We cannot continue to allow Indonesia’s digital economy to become a profit field for global tech giants without the state daring to claim a fair share for the national interest. Indonesia needs an adaptive, modern, and fair tax system. The state must be present to protect national interests amidst very rapid changes in the global economy. The Indonesian people should not merely become a market, a source of data, and consumers, while the economic added value flows abroad without adequate contribution to the nation. Ultimately, digital sovereignty is not just about technology. Digital sovereignty is also about the state’s courage to ensure that every large profit generated from the Indonesian people must return, in part, to finance Indonesia’s development. Otherwise, we will only become a large nation with a large market, but whose economic value is enjoyed by other countries. The Indonesian people buy, use, generate data, and even become advertising targets every day, yet the trillions of rupiah in profits are recorded overseas, while the state is busy collecting taxes from its own people. It is time for Indonesia to stop being merely a digital market for the world. The state must be present, sovereign, and courageous in claiming its rights for the sake of national interest and economic justice for all Indonesian people.