The Jakarta Globe-Jakarta. Finance chiefs of the world’s 20 biggest economies highlighted the difficulties of taxing technology companies during a meeting in Washington, D.C., last week, pointing to global support for Indonesia, which is dealing with a similar problem back home.
“We’ve discussed [potential] tax avoidance on legitimate-but-hard-to-be-taxed transactions […] such as e-commerce and online transactions,” Finance Minister Sri Mulyani Indrawati told reporters on Wednesday (12/10).
Sri had just returned from a weeklong visit to the United States, where she attended the International Monetary Fund and World Bank’s annual meeting. She also made time to formally bid farewell to her former colleagues at the World Bank.
Before agreeing to replace Bambang Brodjonegoro as Indonesia’s finance minister in July, Sri was managing director of the World Bank Group, a position she held since June 2010.
“Many Finance Ministers have the same problem,” she said. “It’s impossible to fight poverty while developing countries are having a hard time to collect taxes from those companies.”
According to Sri, US Treasury Secretary Jacob Lew shared ways during the meeting on how the United States managed to get tech giants, such as Google and Amazon, to pay their taxes. She did not elaborate, however.
Indonesia’s Directorate General of Taxes is currently investigating Singapore-based Google Asia Pacific over allegations that it has millions of dollars in tax liabilities related to payments by Indonesian advertisers.
The government claims that Google Indonesia, the local representative office, paid an “unfairly small” amount in tax because it only allocates about 4 percent of its total revenue from advertisement to be subject to the 10 percent income tax rate.
“I think we should negotiate with Google,” said Yustinus Prastowo, executive director of local policy think-tank, the Center for Indonesia Taxation Analysis (CITA).
According to Yustinus, the government must have accurate data on the amount of revenue Google generated in Indonesia before the start of such negotiations.
“Even if we don’t have a specific regulation, having detailed data would force Google, which has enjoyed profits in the country, to pay tax,” he said.