Indonesia to Google, Twitter, Facebook: Pay taxes or get blocked

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Google Indonesia officeGlobal Internet giants could have their services blocked or at least their bandwidth reduced in Indonesia if they do not obtain “permanent establishment” status in the country and pay their full dues to the Indonesian taxman, government officials said at a press conference in Jakarta on February 29.

Finance Minister Bambang Brodjonegoro said that all Internet-based services must have a local presence in the form of a representative office or a full-fledged company in order to comply with the Indonesian legislation for foreign firms operating in the country and regularly file tax reports.

“All have to create a permanent establishment, like the contractors for the oil sector, so they can be taxed,” he said. Those who don’t comply risk reduction of their bandwidth or get blocked entirely, he warned.

Indonesians are busy users of Google and social media sites. The 250-million-people nation is considered to have Twitter’s largest user base in a country by numbers and is home to the world’s fourth-largest number of Facebook users. Among other Internet service companies, Google opened its Jakarta office as legal entity in 2012, followed by Facebook in 2014 and Twitter was most recent, in 2015, both of which are representative offices.

Communications Ministry spokesman Ismail Cawidu pointed at Google, saying that the company has a huge user base in Indonesia, but the government may not be getting the respective taxes from the company’s Jakarta office because of the way digital transactions are calculated as they are not going through that office.

The ministry estimates that total income from digital advertising in Indonesia was about $800 million last year, but the business was left largely untaxed because of loopholes in regulations. Internet companies now may face greater scrutiny of their tax reports.

Separately, the Communications Ministry aims at issuing a regulation this March containing rules to apply to streaming and messaging providers as well as social media websites to control content related to terrorism, pornography and other “objectionable matter.”

Google’s money trail (example for tax avoidance in Australia)
Similar structures and the same or other tax havens are used by many online and technology firms including Amazon, Microsoft, eBay, Yahoo, PayPal, Netflix, Uber, Rakuten, IBM, Hewlett Packard, Acer, Cisco, Dell, Fujitsu, Asus, Samsung, Toshiba, Sony and others, as well as global brands such McDonald’s, Starbucks, Pizza Hut, Vodafone, Pfizer, GlaxoSmithKline, Kellogg’s, British America Tobacco, Boeing, General Electric, Unilever, Colgate-Palmolive, Merck, FedEx, Ikea, Estée Lauder, Nike, Zara, Philips, Tag Heuer, Boots, Rio Tinto, Glencore, Citigroup and many more.

Those businesses are said to avoid paying a total of $200 billion in tax per year as per an estimate by the United Nations Conference on Trade and Development (UNCTAD) by channeling their overseas investments through offshore financial hubs, which is per se not illegal but an aggressive exploitation of loopholes which is now subject to a worldwide clampdown by international trade organisations.

Google Money Trail

 

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Reading Time: 2 minutes

Global Internet giants could have their services blocked or at least their bandwidth reduced in Indonesia if they do not obtain “permanent establishment” status in the country and pay their full dues to the Indonesian taxman, government officials said at a press conference in Jakarta on February 29.

Reading Time: 2 minutes

Google Indonesia officeGlobal Internet giants could have their services blocked or at least their bandwidth reduced in Indonesia if they do not obtain “permanent establishment” status in the country and pay their full dues to the Indonesian taxman, government officials said at a press conference in Jakarta on February 29.

Finance Minister Bambang Brodjonegoro said that all Internet-based services must have a local presence in the form of a representative office or a full-fledged company in order to comply with the Indonesian legislation for foreign firms operating in the country and regularly file tax reports.

“All have to create a permanent establishment, like the contractors for the oil sector, so they can be taxed,” he said. Those who don’t comply risk reduction of their bandwidth or get blocked entirely, he warned.

Indonesians are busy users of Google and social media sites. The 250-million-people nation is considered to have Twitter’s largest user base in a country by numbers and is home to the world’s fourth-largest number of Facebook users. Among other Internet service companies, Google opened its Jakarta office as legal entity in 2012, followed by Facebook in 2014 and Twitter was most recent, in 2015, both of which are representative offices.

Communications Ministry spokesman Ismail Cawidu pointed at Google, saying that the company has a huge user base in Indonesia, but the government may not be getting the respective taxes from the company’s Jakarta office because of the way digital transactions are calculated as they are not going through that office.

The ministry estimates that total income from digital advertising in Indonesia was about $800 million last year, but the business was left largely untaxed because of loopholes in regulations. Internet companies now may face greater scrutiny of their tax reports.

Separately, the Communications Ministry aims at issuing a regulation this March containing rules to apply to streaming and messaging providers as well as social media websites to control content related to terrorism, pornography and other “objectionable matter.”

Google’s money trail (example for tax avoidance in Australia)
Similar structures and the same or other tax havens are used by many online and technology firms including Amazon, Microsoft, eBay, Yahoo, PayPal, Netflix, Uber, Rakuten, IBM, Hewlett Packard, Acer, Cisco, Dell, Fujitsu, Asus, Samsung, Toshiba, Sony and others, as well as global brands such McDonald’s, Starbucks, Pizza Hut, Vodafone, Pfizer, GlaxoSmithKline, Kellogg’s, British America Tobacco, Boeing, General Electric, Unilever, Colgate-Palmolive, Merck, FedEx, Ikea, Estée Lauder, Nike, Zara, Philips, Tag Heuer, Boots, Rio Tinto, Glencore, Citigroup and many more.

Those businesses are said to avoid paying a total of $200 billion in tax per year as per an estimate by the United Nations Conference on Trade and Development (UNCTAD) by channeling their overseas investments through offshore financial hubs, which is per se not illegal but an aggressive exploitation of loopholes which is now subject to a worldwide clampdown by international trade organisations.

Google Money Trail

 

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