The Asia Internet Coalition (AIC) has submitted comments on the Government Regulation No. 1/ 2020 (PERPU-1) (“Regulation”) passed by the President of the Republic of Indonesia. We understand that these are very trying times and that the Indonesia Government has taken a number of necessary measures to confront the COVID-19 crisis. We are of the view that many of the elements of PERPU-1 represent reasonable steps to address revenue concerns. For instance, we believe that there are well-established principles for applying value-added tax (VAT) to electronically supplied services and believe that is an effective way to tax overseas e-commerce activities. We do, however, have concerns with other elements which we believe will lead to higher prices for consumers in Indonesia, increased fees for SMEs in Indonesia, and limit the innovation in the country. Specifically, the Significant Economic Presence (SEP) and Electronic Transaction Tax (ETT) provisions impose expansive, new tax obligations on sales of goods and services by foreign businesses to Indonesian customers carried out over the internet. It is therefore crucial that Indonesia strives for an effective and fair tax system without creating unnecessary tax burdens and compliance obligations for foreign e-commerce players.
Word file of the submission can be accessed HERE.