JAKARTA (TheInsiderStories) – 95 percent of Indonesian retailers expand to online stores in order to boost their businesses in this digitalized era, said the association yesterday (01/29). Based on Indonesian Retailers Assocition recorded there are 600 retailers in the archipelago with 40,000 physical stores.

According to the chairman, Roy Mandey, five percent of the stores are local businesses and have grown their businesses from physical stores. He argues that offline stores have migrated to online stores through e-commerce or marketplaces boosted by the high demands from its consumers, not only comprise of ‘millenials’ but also from the ‘baby boomers’.

Google and Temasek Holding research showed that e-commerce markets in ASEAN have the potentials to grow to $88 billion by 2025 from $10 billion in 2017. Indonesia can earn up to $150 billion in annual economic impact by 2025, according to the McKinsey, by speeding up the digital economy.

Knows the market improved, Indonesia’ Finance ministry issued new tax rules overseeing businesses within the e-commerce by released the Finance Minister’s Decree No.210/PMK.010/2018 on treating taxations on electronic trade transactions on Dec. 31, 2018.

The regulations stated that the e-commerce players should collect the tax number and identity card (ID) of the merchants then submitted to the Directorate General of Tax. Then, the regulation stated the merchants and e-commerce vendors who sell goods will be subject of the value added tax of 10 percent.

The new rules will be effective beginning April 1, 2019, and are hoped to facilitate businessmen in dealing with their taxation rights and obligations accordingly to their preferred transaction models.

Finance Ministry Sri Mulyani Indrawati explained the government issued the rules to boost Indonesia’ e-commerce into having a comparative advantage compared to other countries.

But the new e-commerce tax policy get a criticized from Indonesian e-Commerce Association (idEA). In their stances, the association asked the government to postpone the new rule.

According to the Chairman Ignatius Untung at a press conference on Jan. 14, that the regulation issued without studies, public testing, and comprehensive socialization of Micro, Small and Medium Enterprises (MSMEs) actors.

He also stated that the government seems to make unilateral regulations without considering the voices of marketplace actors regarding the availability of infrastructure and systems to validate the tax ID number.

Furthermore, the application of these regulations can hamper the growth of medium, small and micro enterprises (MSMEs). Untung said, the regulation was issued without socialization, so feared deadly potential of e-commerce as a driver of Indonesia’s economic growth.

He explained, the marketplace platform has now been considered as an opening opportunity for MSMEs players. As reason, the risks offered by e-commerce are relatively minimal because there is no need to rent shops, employees, and can minimize the costs.

Referring to the McKinsey study in 2018 said that in the next 2022 online trading will create 26 million jobs both directly and indirectly.

“So idEA sees, the enactment of regulation can be seen as an entry barrier. This in no way facilitates their struggle to survive and develop their businesses to burden them,” he noted.

Meanwhile, based on study and facts showed that there are still many micro entrepreneurs who are still at the trial level. Based on these considerations, idEA asked the MoF to postpone and review the implementation of regulation, while jointly conducting a study to find the right formula.

The idEA study in 2017 involving 1,765 SMEs in 18 cities in Indonesia, showed that as many as 80 percent of SMEs were in the micro category. Then 15 percent of them are in the small category, only five percent can be said to be entered into medium-sized businesses.

Meanwhile, Indonesian Consumer’ Foundation’ chairman Tulus Abadi urged the government to immediately ratify the regulation on Trade Transactions for online shopping followed an upward trend.

“We demand the President and ministry soon ratify the regulation on electronic shopping, and we require entrepreneurs to have goodwill for consumers,” he said Tulus on Jan. 25.

He pointed out, the value of e-commerce transactions during the National Online Shopping, skyrocketed to Rp6.8 trillion (US$482.27 million) in 2018 from Rp67.5 billion in 2012. While, the agency  recorded in 2018 it received a total of 564 complaints—forty of which, or around seven percent, were of online shopping.

These  figures have placed online shopping in the fifth position on the list of the most-complained-about industries.

by Linda Silaen, Email: linda.silaen@theinsiderstories.com