To expand their customer base, e-commerce providers have set up a greater variety of categories to choose from, ranging from clothing to wedding accessories. (Shutterstock/File)

The government insists that a new regulation on e-commerce will not burden online traders, who are required to report their transactions and tax credentials in a move to improve tax compliance in the country.

The regulation was criticized by e-commerce players of the Indonesian E-Commerce Association (IdEA), who claimed it might deter small businesses from trading via online platforms, defeating its intended purpose. 

They also protested the requirement for online traders to register for a taxpayer number (NPWP) as stipulated in the regulation.

However, Finance Ministry spokesman Nufransa Wira Sakti said the ministry’s bodies – the Fiscal Policy Agency, the Taxation Directorate General and the Customs and Excise Office—had already met with IdEA management and agreed to revise the regulation. 

“The meeting [participants] agreed on a major aspect [of the regulation], namely that it is not mandatory for merchants to show a taxpayer number [NPWP] when they register with an online marketplace,” Nufransa wrote in a statement.

Traders, he said, could instead simply show their identity card number upon registration. 

This was granted because, under general taxation regulations, people with an income of less than Rp 4.5 million (US$318.91) per month or Rp 54 million per year are not required to have an NPWP.

IdEA chairman Ignatius Untung said fewer than 20 percent of online traders qualified as corporate taxpayers (PKP) or those making more than Rp 54 million a year, according to a survey conducted by the association.  

Untung also referred to President Joko “Jokowi” Widodo’s remarks that encouraged small and medium enterprises (SMEs) to make use of digital technology, as that could help them promote local products at lower operational and marketing costs.

“[The NPWP requirement] could come across as an entry barrier for sellers […]. Many online marketplace sellers are micro businesses that are still testing the waters,” Untung told reporters recently. “They are not certain whether their business will survive or whether they will even continue to do business.” 

IdEA vice chairman for the digital economy Bima Laga suggested that the government insert a specific article in the regulation to exempt micro-scale traders, claiming that most of them made less than Rp 300 million in revenue a year, far below the Rp 4.8 billion threshold.

Radityo Triatmojo, head of government relations at Singapore-based online marketplace Shopee, said 70 percent of more than 1.6 million active local sellers on his platform were categorized as SMEs, meaning most of them would be affected by the new regulation.  

The new policy is stipulated in Finance Ministery Regulation No. 210/2018, which was signed by Finance Minister Sri Mulyani Indrawati on Dec. 31 last year. It was initially scheduled to take effect on April 1, but was only communicated to the public last week.

The regulation stipulates that online sellers whose revenue is below Rp 4.8 billion per year will be subject to a 0.5 percent SME tax, whereas sellers making above Rp 4.8 billion per year will pay taxes according to the appropriate rates. 

Furthermore, Untung of the IdEA criticized the regulation as heavily skewed against online sellers transacting on official marketplaces and was not paying enough attention to those on social media.

The aforementioned research shows that only 19 percent of Indonesian online sellers run their business exclusively through online marketplaces, whereas 95 percent of them prefer to use social media or both, even though the latter lacks consumer protection.

“This shows that, even without the regulation, marketplace platforms — which are complying with the prevailing rules – are struggling to compete [with unofficial and unsupervised platforms like social media] to attract revenue,” said Untung, pointing to the fact that idEA members were fewer than 30 marketplace platforms, compared to hundreds of thousands of social media-based sellers.

Untung emphasized that the request to review and delay the implementation of the regulation did not mean IdEA was encouraging online sellers to evade taxes, but rather because the government had not elaborated on the impacts and economic benefits from the move. 

Responding to that, the Finance Ministry’s Nufransa said the regulation was not intended to boost tax revenue but aimed rather at gathering more information to help authorities build a more comprehensive e-commerce database.

“This data will be analyzed to assess the progress of e-commerce in Indonesia and will serve as the basis for determining future policies,” he said. “Therefore, the operational aspect of the regulation will ensure protection for micro-SMEs and people who are just getting started with their e-commerce business.”

Source : TheJakartaPost