Six over-the-top (OTT) technology firms are ready to collect value-added tax (VAT) from consumers as the government ramps up collection efforts to fund the country’s fight against COVID-19, a government official said Thursday.
Tax office chief Suryo Utomo said six OTT companies with “significant economic presence” would collect VAT from consumers in August, adding that the government was also in talks with several other firms to collect VAT.
Suryo, however, declined to name the companies. Finance Minister Sri Mulyani Indrawati has repeatedly mentioned the government is targeting Netflix, Spotify and Zoom.
“We will announce the firms that will collect VAT on digital goods and services in early July,” Suryo told reporters during a streamed news conference. Consumers who buy the platforms’ products or services will have to pay taxes starting Aug. 1, a month after the policy comes into effect on July 1, he added.
Suryo said the six internet firms were preparing infrastructure to implement the government regulation, adding that the government would need to reach an agreement first before announcing the companies.
The government is pressing ahead with collecting digital tax despite an announcement by the United States Trade Representatives (USTR) to investigate such policy, which the US said was aimed squarely at its technology giants.
However, the government has maintained that the VAT was not the subject of investigation by the US, which is focusing more on corporate income tax plans for technology companies, a topic of discussion led by the Organization for Economic Cooperation and Development (OECD).
“We are trying to impose the VAT first as we’re still waiting for the OECD’s consensus on how to impose corporate tax to find a long-term solution,” said Suryo.
The government has been struggling to collect more revenue to fund its cash-strapped budget as the COVID-19 pandemic hits almost all business sectors. Ministry data shows state revenue reached Rp 664.3 trillion (US$47.41 billion) as of May, down 9 percent year-on-year (yoy), as tax income dropped 10.8 percent yoy to Rp 444.6 trillion.
Law No. 2/2020 stipulates that the government is able to charge VAT on taxable intangible goods and/or services sold through e-commerce platforms. It can also charge income tax or electronic transaction tax on e-commerce operated by foreign individuals or digital companies that have a significant economic presence.
Netflix did not immediately respond to an inquiry by The Jakarta Post.