Google should pay tax in Indonesia

Google has become part of the daily routine for most people. 

The giant Internet-based search engine company provides access to billions of pages of information in micro seconds without directly charging its users.

It serves people looking for data, documents, maps, pictures and even recipes.

Founded by Larry Page and Sergey Brin in 1996, Googles search engine was registered as Google.com in September 1997 and then incorporated in 1998.

Google offers an array of products and services including search tools, advertising services, communication tools, publishing services, and development and security tools, as well as map-related products, statistical and mobile-based software, and hardware.

Because it is so popular, Google earned US$75 billion in revenue in 2015 from its proprietary advertising service, Google AdWords. Of that revenue, over 77 per cent, or just over $52 billion, came from Googles own websites. 

With a population of over 250 million, where at least 100 million are Internet users, Indonesia is one of the largest online markets worldwide. 

Digital advertising expenditure in Indonesia in 2016 is estimated to increase significantly to more than $1 billion.

As a result of the Indonesian governments efforts to increase the states revenues from taxes in order to narrow the budget deficit and fund infrastructure development, Google is one of several companies that have been targeted to pay tax in the country. 

Finance Minister Sri Mulyani has confirmed that Googles economic activities in Indonesia are subject to taxation. 

She made the statement at a press conference held at the presidential office recently, in response to reports of Google Indonesias objection to paying taxes.

All countries are facing tax problems with Google and various kinds of electronic transaction agencies, she admitted.

"The Tax Directorate General has used various laws in Indonesia to confirm that all activities carried out online or on e-commerce platforms are taxable objects in Indonesia," she said.

Taxpayers may have a different argument but the Republic of Indonesia has had a tax law, the minister said.

"If there are differences we can certainly resolve them bilaterally or through a tax tribunal," she said.

Entities conducting business in Indonesia must set up what is called "Permanent Business Entity" and that would make their business activities in the country a tax object, she said.

"I admit this issue is faced by many countries, and it is not an easy matter," she said.

She would continue making efforts in line with the laws to make entities conducting economic activities in Indonesia tax payers, so they can pay their taxes according to the existing law.

In addition to the finance ministry, the communication and informatics ministry has also urged Google to pay tax in Indonesia and to set up a permanent establishment, just as the US-based technology provider has done in several other countries.

"We have told Google to apply the same norms in Indonesia (as it did in India or Brazil). Googles revenues from Indonesia and advertisements targeted at Indonesia are taxable. Google is expected to set up a permanent establishment in Indonesia," Noor Iza Noor, acting head of the ministrys public relations department, said, as per the ministrys website, recently.

Google leaders consider Indonesia important for the company, just as India and Brazil are, so Google should apply the same principles in terms of transactions and tax, he added.

He noted that Google has had a permanent establishment in India and paid tax which is quite high.

"We hope Google will be wise in business and will apply the principle of equality. Transactions should not be pooled only in certain countries, while disadvantaging other countries that spend on Google," he argued.

The Tax Directorate General of the Indonesian Finance Ministry had earlier officially asked Google to pay tax.

Google, however, has refused to be inspected, and also to be considered as a business entity subject to tax.

"We will take a harsher measure," Muhammad Haniv, head of the Jakarta Tax Office, noted in a press conference.

He said talks did take place with representatives of Google Asia Pacific Pte Ltd located in Singapore, but failed because they rejected being subjected to taxation.

"We will try to carry out negotiations to persuade them to pay taxes, particularly as per norms of fairness, because this approach worked in Britain," he added.

In the meantime, the head of the Investment Coordinating Board, Thomas Lembong, recognized that the tax violations being committed by Google in Indonesia posed a challenge.

He stated that most countries are facing a similar situation.

"The issue of the internet and digital services operating globally is a challenge all countries face," he remarked

Source: ANTARA