JAKARTA : The Indonesian government is preparing to enforce new regulations that would compel e-commerce platforms to withhold taxes on behalf of their sellers, in a renewed effort to enhance state revenue and create parity with traditional retail businesses. According to industry sources briefed by tax authorities and an official document reviewed by Reuters, the directive could be formally introduced as early as next month.
This upcoming regulation is expected to apply to leading digital commerce operators such as ByteDance’s TikTok Shop, Tokopedia, Shopee (owned by Sea Limited), Alibaba-backed Lazada, Blibli, and Bukalapak. These platforms would be required to deduct and remit tax from seller income directly to the government.
The policy, aimed at sellers with an annual turnover between 500 million rupiah and 4.8 billion rupiah, proposes a 0.5% tax on sales income. These sellers, currently classified as small and medium-sized enterprises (SMEs), are already obliged to pay the tax independently. The shift in responsibility to the platforms is intended to improve compliance and streamline collection.
The proposal, however, has met resistance from within the e-commerce sector. Operators argue the requirement will substantially increase administrative burdens and potentially drive sellers away from digital marketplaces. Concerns have also been raised about the ability of Indonesia’s tax infrastructure—currently affected by technical challenges following a recent system upgrade—to manage the anticipated influx of data.
This is not the first time such a policy has been considered. In late 2018, a similar regulation was introduced mandating online marketplaces to share seller data and facilitate tax compliance. It was retracted three months later amid significant industry opposition.
A presentation prepared by the Directorate General of Taxes and shared with platform operators confirms the government’s intention to reintroduce the mechanism, this time with stricter enforcement and a proposed penalty structure for platforms that fail to submit timely reports.
The Ministry of Finance, which will oversee the implementation of the regulation, declined to comment. The Indonesian E-Commerce Association (idEA) refrained from confirming the plan’s details but acknowledged that, if enacted, the policy would have implications for millions of online sellers.
Indonesia’s state revenue performance has been under pressure in recent months. Official data reveals a year-on-year decline of 11.4% in revenue for the January to May period, amounting to 995.3 trillion rupiah (US$61 billion), attributed to low commodity prices, subdued economic growth, and delays linked to the tax system upgrade.
Despite these fiscal headwinds, Indonesia’s e-commerce sector continues to thrive. A joint report by Google, Singapore’s Temasek, and consultancy Bain & Company estimated the nation’s gross merchandise value reached US$65 billion in 2023, with projections pointing to a rise to US$150 billion by 2030.
As regulatory authorities weigh new measures to stabilise revenue flows, the proposed withholding tax regulation signals a strategic pivot towards greater oversight of the digital economy, with significant implications for the business models of online platforms operating in Southeast Asia’s largest market.
-Reuters
