Indonesia-Google focus on win-win solution

JAKARTA. The negotiation between the Indonesia’s tax authority with Singapore Google was likely to reach positive result, despite the meeting has not reached agreement on the tax amount should be paid by the over the top (OTT) company.

Head of Jakarta Regional Office of Special Tax Muhammad Hanif said that the Directorate General of Taxation is conducting settlement process to estimate the total amount tax should paid by Google, including the income tax and value added tax (VAT).

In details, the tax debts of Google may reach Rp 5.5 trillion. The number has included a 400% fines of its principal tax, which amounts to Rp 1 trillion. The settlement process is more on finding win-win solution, while rules out the fines.

Hanif expects that the process will complete in the several weeks ahead. If the agreement fails, Directorate General of Taxation will conduct investigations.
Hanif has asked Google to immediately settle the negotiation process, since both Google and Indonesia need each other.

Obviously, Google does not want to loose the Indonesian market, which has 120 million internet users.

Hanif said that to date, the number of value added tax paid by Google was insignificant. “That’s why we asked them to pay accordingly. We have lost potential revenues from the VAT (value added tax), since the advertising service should pay VAT,” he said.

Aside of Google, tax authority will apply the similar measures to other OTT companies, such as Facebook, Twitter, and Yahoo. Hanif admitted that the Directorate General of Taxatuon has sent letter to Facebook. “We are pursuing (them), as in fact, they exist in Indonesia,” he said.

The Directorate General of Taxation will also send a letter to the Government of Irlandia, where Facebook is based. “We will have a meeting in the next two weeks, maybe through video call,” he said.

To date, the total income of the OTT companies in Indonesia amount to US$840 million. The incomes of Google and Facebook contribute to 70% of the total income. The tax authority will also pursue Twitter and Yahoo.

Menkeu Sri Mulyani Indrawati saw that the aggressive tax planning strategy of the companies is immoral. "If you make money here, is just fair for you to paid tax here. I dont care where your headquarter is," she said.

(Muhammad Farid/ Translator)