Facebook Is Next on Indonesia Tax List as Google Deal Nears
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Indonesia is eyeing Facebook as its next target in a government tax crackdown as it nears a settlement with Google Inc. Facebook, which counts more than 88 million Indonesians among its users, owes about 2 trillion rupiah ($148 million) to 3 trillion rupiah in unpaid taxes and penalties, Muhammad Haniv, head of the special taxpayers office at the Finance Ministry’s Tax Directorate-General, said on Wednesday in Jakarta. The office has sent a letter to the company in Ireland, calling for a meeting to discuss the issue and seek information on the company’s business interests in Indonesia, he said.
Yunita Purnamasari, an external spokeswoman for Facebook in Jakarta, said Thursday she couldn’t comment at this stage on the tax demand. Apple, which is also being targeted by the tax office along with Twitter and Yahoo!, didn’t immediately respond to a request for comment.
Indonesia’s government is seeking to boost revenue as it tries to keep the budget deficit below the legal limit of 3 percent. Authorities have turned to Instagram Inc. stars and merchants peddling goods and services on social media to bridge a revenue shortfall as an ambitious tax amnesty program loses steam after earning the government 97.1 trillion rupiah in the first three months of its start in July.
Indonesia’s government plans to drop claims on any unpaid taxes and penalties it has sought from Google if a settlement is arrived through negotiations, Haniv said. The settlement with Google, the largest unit of Alphabet Inc., may come as early as next week and the government will focus on ensuring the company pays all future taxes, he said. The company owes about 5 trillion rupiah in taxes and penalties, he said.
Taj Meadows, Google’s head of policy communications for Asia Pacific, declined to comment on Wednesday and referred to an earlier statement that said the company had paid all applicable taxes and will continue to fully cooperate with the Indonesian government.
Indonesian tax officials have visited Google’s office in central Jakarta several times in recent months. The government had earlier sent Google a warning letter for refusing a tax audit that can result in criminal punishment, Haniv said in September.
Questions & Answers
Q.Why is the Indonesian government targeting technology companies for unpaid taxes?
Why is the Indonesian government targeting technology companies for unpaid taxes?
The government is seeking to boost revenue to keep its budget deficit below the legal limit of 3 percent. It is also trying to bridge a revenue shortfall, as an ambitious tax amnesty program is losing steam after its initial success.
Q.What is the estimated amount of unpaid taxes and penalties Facebook owes Indonesia?
What is the estimated amount of unpaid taxes and penalties Facebook owes Indonesia?
Muhammad Haniv, head of the special taxpayers office, stated that Facebook owes between 2 trillion rupiah ($148 million) and 3 trillion rupiah in unpaid taxes and penalties. A letter has been sent to the company in Ireland to discuss this matter.
Q.How does the potential settlement with Google affect their outstanding tax claims?
How does the potential settlement with Google affect their outstanding tax claims?
If a settlement is reached through negotiations, the Indonesian government plans to drop claims on any unpaid taxes and penalties it has sought from Google. The focus would then shift to ensuring the company pays all future taxes.
Q.Which other technology companies are being targeted by the Indonesian tax office?
Which other technology companies are being targeted by the Indonesian tax office?
Besides Facebook and Google, the tax office is also targeting Apple, Twitter, and Yahoo!. The government is broadly looking at social media merchants and Instagram Inc. Stars to address revenue shortfalls.