Indonesia plans to implement new regulations requiring e-commerce platforms to withhold tax on their sellers’ sales income in a bid to boost revenues, according to two industry sources informed of the move and a document seen by Reuters.
The planned directive, which also aims to level the playing field with brick-and-mortar shops, could be announced as soon as next month, one of the sources said, as Southeast Asia’s largest economy grapples with weak revenue collection.
The changes would affect the country’s main e-commerce operators, including ByteDance’s TikTok Shop and Tokopedia, Sea Limited’s Shopee, Alibaba-backed Lazada, Blibli and Bukalapak, one of the sources said.
E-commerce platforms are opposing the regulation, arguing it could increase administrative costs and push sellers away from online marketplaces, said the sources, who were briefed on the plan by tax authorities.
Indonesia introduced a similar regulation in late 2018, requiring all marketplace operators to share sellers’ data and make them pay taxes on sales income, but withdrew it three months later due to a backlash from the industry.
The sources asked not to be named as they were not authorised to speak publicly about the matter.
Indonesia’s finance ministry, which will be responsible for issuing the order, declined to comment.
Indonesia’s e-commerce industry association idEA would not confirm or deny details of the plan. However, it said the policy will affect millions of sellers if implemented.
Finance ministry data showed revenues fell 11.4% year on year in the January to May period to US$61 billion due to low commodity prices, weak economic growth and disruptions to tax collection caused by a system upgrade.
Indonesia’s e-commerce industry, meanwhile is booming, with last year’s estimated gross merchandise value of US$65 billion expected to grow to US$150 billion by 2030, according to a report by Google, Singapore state investor Temasek and consultancy Bain & Co.
The sources said that under the new rule e-commerce platforms will be required to withhold and pass onto the authorities tax amounting to 0.5% of sales income from sellers with annual turnover of between 500 million rupiah and 4.8 billion rupiah.
Those sellers are considered small and medium-sized enterprises and are already required to pay that tax directly.
One of the sources added that there was also a penalty proposed for late reporting by e-commerce platforms.
The sources’ comments were corroborated by the contents of an official presentation the tax office made to operators that was seen by Reuters.
In addition to the expected additional administration costs, e-commerce platforms are expressing concern the current tax system, which has been facing technical problems after an upgrade at the start of the year, will struggle to handle the amount of data the tax office is asking marketplaces to share.
