With the revocation of Indonesia Finance Ministry on e-Commerce tax (No.210/PMK.010/2018) earlier this year, shockwaves have been made among local and international business owners. While the country has deemed tax revenue as a top priority of action, the Indonesia e-Commerce industry is still in its infancy stage and additional interventions may not be a wise move to encourage growth.
E-commerce has proven itself as a massively successful alternative to physical retail. In fact, we can see examples throughout the world where e-commerce has caused significantly increased competitions among the retail sector. Industries such as physical media in particular have been hit particularly hard by e-commerce.
Indonesia’s e-commerce tax regulation that was scheduled to come into effect on April 1 could potentially become a roadblock for Indonesian e-commerce, sellers and platforms alike. Since the sector is still relatively young, the regulation would have likely crippled the industry to such an extent that it would have delayed the maturity of the industry by several years or halt its growth entirely.
While tax revenue collection is a national priority, applying an e-commerce tax may disincentivise businesses from coming online, as sellers are using e-commerce as a way to grow and reach new customers, rather than as a way to evade tax payment.
Over the past few years, Indonesia has shown to the world it’s potential for future economic growth. The country is now on the road to rapid digitalisation as its ambitions to become one of Southeast Asia’s leading digital economies is just within reach. A significant contributor to the nation’s future growth is e-commerce, driven by one of the highest social media usage rates globally, and the expected 50 million new internet users coming online between 2015 and 2020.
By 2022, Indonesia will have 44 million online-commerce shoppers, with an estimated worth of US$55 billion to US$65 billion, according to consulting firm McKinsey.