JAKARTA (TheInsiderStories) – The Indonesian government has revealed a plan to impose import duties on intangible goods tradable on ‘on-line platforms’ – such as e-books, software, and online archives. The new protocol was initiated by Finance Minister Sri Mulyani Indrawati, with the objective of broadening State Revenue streams in upcoming years.

The import duty will be effectively imposed from 2018, or once the World Trade Organization (WTO) moratorium expires. In fact Indonesia has been bound by a WTO moratorium that bans developing countries from charging import tariffs on intangible goods traded electronically.

“The moratorium is merely related to import tariffs. We can still charge value-added tax and other taxes. So, let’s see [how these taxes] can be levied,” Minister Indrawati said, as quoted by Kontan daily.

The moratorium was first initiated by the WTO on May. 20, 1998, during the Second Ministerial Conference held in Geneva, Switzerland. A declaration made during the conference stated ‘members will continue their current practice of not imposing customs duties on electronic transmissions’.

Controlling Goods Imports

The internet-based economy is growing significantly in Indonesia. Its economic potential is huge and can become one of the backbones of the national economy. Indonesia’s digital transaction data grew rapidly over the last 5 years. According to Data from eMarketer, Indonesia’s e-commerce transactions reached US$5.6 billion in 2017.

Startups in Indonesia are also growing in number. According to Google-Temasek research data (2016) the number of startups in Indonesia alone amounted to 2033, or about 29 per cent of the total in Southeast Asia. This number is more than Singapore, which is ranked second with 1,850 startups. This demonstrates the potential of e-commerce in Indonesia.

Existing e-commerce companies in Indonesia are very optimistic, predicting the move as they prepare themselves for the big battle. On May 2017, ‘Sea’ (formerly known as ‘Garena’) raised US$550 million to back their Indonesian e-commerce platform, ‘Shopee’. Chinese giant retail Alibaba has also invested in one of the biggest marketplace players in Indonesia, ‘Tokopedia’, for up to US$500 million.

Indonesian Coordinating Economic Minister Darmin Nasution noted that all e-commerce products imported into Indonesia will become subject to an duties, or tariffs. Currently, based on international regulations, only relatively cheap e-commerce products (valued below US$ 100) are exempt from import tariffs in cross-border traffic that involves Indonesia.

“International e-commerce is developing around the world – yet there has been no strong enforcement in terms of import duties until this December,” said Nasution.

With enforcement of the new regulation, Nasution, who formerly Director General of Taxation, expects the government to be able to collect revenues from Google, Lazada and others, to safeguard a healthy trade balance and reduce pressures on the rupiah exchange rate. Therefore, the government is also highly supportive of import substitution industrialization. (*)


Written by Elisa Valenta, email : elisa.valenta@theinsiderstories.com