Picture: BLOOMBERG/SIMON DAWSON
Picture: BLOOMBERG/SIMON DAWSON

Jakarta — Indonesia is widening its tax net to target global technology giants such as Google and Facebook, a strategy that is raising red flags for fear it may deter foreign investment.

Finance Minister Sri Mulyani Indrawati is seeking to squeeze more revenue out of an economy that has been hit by weak commodity prices and subdued demand from China, Indonesia’s biggest trading partner. Halfway through a tax amnesty plan, the government has raised almost 100-trillion rupiah ($7.4bn) in income from penalties and is now turning its focus to companies such as Apple, Twitter and Yahoo!

"We’re just looking for fair treatment," said Lin Neumann, MD of the American Chamber of Commerce in Indonesia. If companies "end up in a … red-tape situation, that is not conducive to making plans for growth", he said. "Ultimately, that situation hurts Indonesia."

Indonesia had initially put Google’s tax and penalty bill at 5-trillion rupiah, but could lower that to 1-trillion rupiah in a settlement that may come as soon as this week, according to Muhammad Haniv, head of the special taxpayers office with the finance ministry’s tax directorate-general.

Facebook, Twitter, Apple and Yahoo! did not respond to requests for comment. Taj Meadows, Google’s head of policy communications for Asia Pacific, referred to an earlier statement that said the company had paid all taxes and would continue to co-operate fully with the Indonesian government.

Google has faced tax investigations elsewhere, including in the UK, where tax authorities reached a £130m settlement with the company’s parent, Alphabet, in January.

Alex Cobham, director of research at the Tax Justice Network in London, said the UK Google case confirmed "just how embedded among multinationals is the practice of separating sales, and the jurisdiction where they take place, from
the profits that those sales give rise to".

Bloomberg

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