Facebook, Disney and TikTok will now be required to pay 10 percent value-added tax (VAT) on sales to Indonesian customers, the tax office announced on Friday. The three companies are the latest additions to the long list of tech firms that will now have to pay the government if they continue to operate in Indonesia.
Indonesia last month announced the names of a bunch of technology firms including Amazon and Netflix that from now need to pay 10 percent VAT on sales to all customers in the country, as spending pattern has changed drastically over the past few months due to an increasing number of people working and learning from remote locations.
The new list of tech companies released on Friday includes three units of Facebook, Tiktok Pte Ltd, Apple Distribution International Ltd, The Walt Disney Company (Southeast Asia) Pte Ltd, and a host of Amazon's subsidiaries, including its audiobook unit Audible and its voice assistant Alexa. The companies are yet to comment on the development.
Understandably, the 10 percent VAT will bite into the profits of the companies but it is still not known if the burden will be ultimately passed on to the customers in the form of higher prices for the products and services. The decision comes just a month after the tax department announced that it will impose 10 percent VAT on sales by tech giants like Amazon, Netflix, Spotify and Google.
Will it Help the Government?
Much like other countries, Indonesia, which is the largest country in Southeast Asia and boasts a population of over 270 million people, too has been battered by the coronavirus pandemic. The pandemic has hit the government's finances and it is now looking for new options to make up for the lost revenue.
With more people shopping, working and learning online, the country now has decided to charge tech companies for operating in the country in a bid to raises finances. Under Indonesia's rule, non-resident foreign tech firms, which sell digital products and services in Indonesia worth at least $41,039.67 (600 million rupiah) every year or those who generate annual traffic from more than 1,200 users are required to pay an additional 10 percent VAT.
Indonesia has forecast a 13 percent drop in annual revenue this year as coronavirus continues to hamper businesses and operations. A 10 percent VAT if not fully, will partially make up for this lost revenue. Moreover, as more people continue to shift online and companies increase their dependency on cloud business, the tax amount will only further grow.