Ramping Up Digital taxation

Tax office formulates tax collection system for online businesses

The Jakarta Post
Monday, July 24, 2017

The Directorate General of Taxation is now formulating a mechanism to collect tax money from digital or online businesses, including taxes that had to be paid by providers of ride-hailing applications.

“We try to formulate the tax collection mechanism because it is different from tax collection at factories,” said tax office spokesman Hestu Yoga Saksama said as reported by kompas.com on Thursday, adding that the taxes collected from online businesses were either value-added taxes (PPN) or income taxes (PPh).

He said, however, his office needed to formulate the mechanism for the tax collection because online businesses were new.

He explained that there were two methods to collect income tax. First, a taxpayer makes a self-assessment of the amount of taxes he or she has to pay and, second, the taxes were calculated and collected by tax officers.

Meanwhile, online business owners pay their taxes through a self-assessment mechanism, Hestu added.

Hestu also revealed a low tax-to-gross domestic product ratio (tax-to-GDP ratio), which was only 10.30 percent, indicating low obedience of Indonesian taxpayers in fulfilling their obligations.

“It is one of the bad indications of the Indonesian economy because it relates to our financial strength to develop this country,” he added.

The tax office set a target to increase the tax-to-GDP ratio to 16 percent in 2016.

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