International

Indonesia Levies 10 Pct Tax On Sales From Tech Firms

VAT

Starting next month, it will cost Amazon, Netflix, Spotify and Google more to do business in Indonesia.

The Southeast Asian country’s national tax office announced it will impose a 10 percent value-added tax (VAT) on foreign global technology companies as the nation looks for ways to defray the costs of battling the economic effects of the COVID-19 pandemic, Reuters reported.

A VAT is levied on a product whenever value is added at each stage of the supply chain, from production to sale.

The tax is in response to an expected 13 percent drop in state collections as the coronavirus took its toll on revenues. In addition, the country has spent nearly $50 billion for the fight against the virus. The country’s total budget for 2020 is $177.6 billion.

With a population of nearly 270 million, Indonesia is in the midst of a boom in its digital economy, which is expected to reach $130 billion by 2025, according to a study by Google, Temasek Holdings and Bain & Co.

Under the terms of the VAT, foreign companies that sell digital products and services in Indonesia worth at least 600 million rupiah ($41,667) a year, or generate annual traffic from at least 12,000 users, will be required to pay the 10 percent VAT, the news service reported.

“The tax office will continue to communicate with relevant businesses abroad ... the number of companies assigned to apply VAT for digital products will likely increase,” Hestu Yoga Saksama, tax office spokesman, told Reuters.

A Netflix spokesman said the company would comply.

“It is for governments to decide the rules on VAT and in every country we operate, Netflix respects those rules,” Netflix told Reuters.

Amazon Web Services, Google and Spotify did not respond to requests for comment.

Earlier this year, Liz Armbruester, senior vice president of global compliance at Seattle software company Avalara, told PYMNTS cross-border commerce is expected to reach as much as 15 percent of the online retail market.

“We want things now, and we want them from everywhere,” she said, noting firms that want to sell across borders have to take VAT, tariffs and other costs of doing business into their strategic plans.

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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