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Indonesia has been making efforts to collect tax from internet-based firms which have reaped huge amount of advertisement funds from their online operation in the country following rejection of the United States-based searching engine giant Google from being examined by Indonesian tax office.
In its operation in Indonesia, Google was identified to have been tapping huge amount of earnings from online commercial advertisement placed in its website.
Indonesian tax office can do nothing to force Google to pay tax as its existence in Indonesia was only a representative office, not a legal fixed business institution (BUT) with office presence, the essential requirement for a taxpayer firm.
Head of Jakarta Tax Office Muhammad Hanif said collecting tax from internet-based firms was not an easy task, adding that similar situation was also faced by other countries.
Google operates in Indonesia as the "Dependent Agent' of Google Asia Pacific Pte. Ltd.," Hanif said. He added that discussion with the Singapore-based firm on tax collection had been conducted, but it ended with deadlock as the firm refused to pay tax to Indonesian government.
"We will try to negotiate it so as to make them pay the tax. We would approach them with fairness issue," Hanif said. According to him, the approach was working in Britain.
He said Google should be fair to pay tax to the countries where it has tapped its fortunes from.
He added that tax examination would also be conducted against other social media and internet-based firms taking advantages from online advertisements in their operations in the country, like Facebook and Twitter.
According to Indonesian Communications and Informatics Ministry, spending on online advertisement in the country reached 1.1 trillion rupiah (about 800 million U.S. dollars) last year in which around 75 percent of that amount went to Google and Facebook.
The ministry estimated that online advertisement would grow up to 1 billion U.S. dollars this year.
An Indonesian tax analyst said Google takes advantages from Indonesian legal loophole as the existing regulation set for taxpayer firm requires a fixed business place or physical presence.
"The presence of Google and other Information Technology (IT) -based firms is not physical but virtual," Executive Director of Center for Indonesian Taxation Analysis Yustinus Prastowo said over the weekend.
He said such a problem also appears in several countries in the world as their tax regulation recognizes taxpayer firms as the ones with fixed business institution and physical presence in their respective countries.
Responding to the issue, Indonesian Finance Minister Sri Mulyani said the government would discuss it first with Google. If the discussion fails, the government was ready to take legal process, she pointed out.
"If they were not agreed (to pay tax) there was a tax court mechanism, we'll see. Our law has clearly set the regulation to determine the tax objects as well as the tax subjects," the minister said on Friday.
The former World Bank executive director said Google reluctance to pay tax should be regarded as a warning to assure the tax funds that can be collected from digital internet business.
She added that her ministry has formed a team to further study and compose particular tax regulation on e-commerce and digital-based firms operating in the country.
The minister also said Indonesia would also raise this issue to international level so as to make tax regulation on digital internet technology business can be synergized globally.
(APD)
