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New Indonesia tax regulations for online retailers

Indonesian SMEs will have to report their earnings to the government from now on. Source: quartz.com

The Indonesian government plans to implement new tax regulation that will affect individuals and companies that generate revenue and profit through online retailing reports Tech Wire Asia.

Daniel Tumiwa, Chairman of Indonesian Ecommerce Association (idEA) confirmed the special economic package on ecommerce will allow SMEs to be charged a small percentage of tax by the government. The amount will be reasonable and smaller than the current tax rate that SMEs now pay offline. However, the exact rate has not been officially announced.

Anyone who owns an online shop – including those operating through Instagram and Facebook – will be subject to the new regulation.

In 2013, Indonesia’s Finance Ministry issued a regulation that placed a 1% income tax tariff on tax payers with an annual turnover below $363,636. SMEs with an annual turnover below $3.8 million obtain a 50% tax discount.

Transactions from small and medium sized businesses are difficult for Indonesian authorities to monitor as they operate without set regulations. Most of the SMEs are without legal entities or taxpayer identification numbers, which in turns means the businesses are also not protected.

There are approximately 50 million active SMEs operating in Indonesia, but not all small companies can afford to go online. The Indonesian government has also proposed initiatives that would aim to bring 2 million SMEs online within the next two years, with the goal of having 8 million SMEs online by 2018.

It is said that an official announcement of the exact rate should be announced in September after the first phase of the tax amnesty policy implementation, which will increase tax revenue in the future.

A version of this appeared in Tech Wire Asia on July 8. Read the full version here.

Indonesia policy reform

Source: Google images

The World Bank praised Indonesia’s recent reforms, including higher public infrastructure spending and deregulation measures to lessen strict trade and investment policies, for maintaining the country’s resilience and allowing the government to diversify economically.

Since September 2015, the government’s has announced numerous policy reforms. Some sectors — in particular, trade and investment policy — witnessing a shift towards deregulation and have helped to maintain investor confidence in the country, hence Indonesia’s resilience against limited investment due to slowing global demand and volatility in the global financial market.

Moving to Manufacturing

Rodrigo Chaves, the World Bank’s Country Director for Indonesia, said global economic headwinds, including the consistently low commodity prices and the sluggish global trade, have forced Indonesia — a commodity exporter country — to expand into sectors other than mining and commodity, such as the manufacturing and service sectors.

Indonesia’s manufacturing operations are dominated by assembling and blending, which makes the country vulnerable to changes in multinational corporations’ global strategies. The country’s global share of manufacturing has remained at around 0.6 percent over the last 15 years.

“This is the right time to improve Indonesia’s manufacturing sector,” said Ndiame Diop, the World Bank’s Lead Economist for Indonesia. “Now is a critical moment for Indonesia to implement further reforms that will enhance the competitiveness of its manufacturing and services sectors, especially tourism.”

The World Bank kept its March prediction that the Indonesian economy will grow 5.1 percent this year.

Earlier this month, the Bank downgraded its global growth forecast to 2.4 percent from the previous 2.9 percent. Private consumption and public capital spending are projected to support Indonesia’s growth this year.

“Indonesia’s policy reform is the foundation of our economic resilience. I can’t stress this enough,” said Trade Minister Thomas Lembong.

A version of this appeared in Jakarta Globe on June 20. Read the full article here.

OnePlus Quits Indonesia

Source: Google Images

OnePlus blames Indonesia’s complex and strict regulations on imported smartphones for its decision. Last year, the government passed a law that requires imported 4G phones to contain 30 percent locally sourced components. OnePlus failed to complete the mandatory certification process on time and the investments needed to comply with the new regulation, set to take effect in January 2017, is too overwhelming for the relatively new brand.

“Chinese phone maker OnePlus is halting its operations in Indonesia. That means the company’s upcoming flagship phone, the OnePlus 3, will not be sold in the archipelago through official channels”

The regulation would require OnePlus to build a new fulfillment center or join a local factory, something beyond the company’s current capability. OnePlus will be missing an enormous opportunity to reach the 326M Indonesians on mobile where foreign companies such as Samsung and Asus are performing well.

Indonesia mobile

The new regulations set by the Indonesian government as an attempt to give room for local players may decrease success found by smaller foreign brands. It also highlights the complexities of doing ecommerce in Indonesia as ever-changing government regulations is often seen as a bottleneck to business growth.

Read the full article on Tech in Asia here.