Encouraging productivity and increasing efficiency are two basic variables that are the key to success towards a better life: modernization and economic liberalization. Today, technology adheres to these two things: expanding market access and reducing costs. In economic terms, the presence of technology is conceived as a digital economy.
It is true that digital economy changes many things, such as preferences, marketing and payment systems. In terms of preferences, for example, consumers today love online transportation services not only because of the practical ordering, but also the cheap rates compared to offline transportation services.
However, basically, digital economy will not change one fundamental thing, namely goods or services that are attached to the underlying products. People will still shop for clothes (clothing), buy housing (boards), and consume food and drinks (food). People also still need transportation modes to move from one place to another, entertainment (entertainment), and recreation (leisure).
In other words, digital economy is not at all a disruption to the economy, but a breakthrough to encourage productivity and increase efficiency. This economic perspective is tantamount to a tax perspective so that there is no new taxation on transactions in this digital economy. There is only fair treatment between conventional traders and online traders.
Taxes see that underlying products do not change. People who trade clothing in the Tanah Abang market are no different from those who trade in the digital marketplace. The seller continues to receive income and the object of delivery of goods and / or services is still the same.
Thus, both traders in the Tanah Abang market and in the marketplace are equally liable to pay income tax and collect Value Added Tax (for Taxable Entrepreneurs).
Legit E-commerce Cake
Based on Statista data, the niche of the e-commerce market in the world in 2018 reached US $ 2.84 trillion, equivalent to Rp. 39,788 trillion (exchange rate of Rp. 14,000), 2.5 times the value of Indonesia’s gross domestic product (GDP). The e-commerce value is projected to penetrate US $ 4.88 trillion in 2021. China leads the largest e-commerce market share with a transaction value of US $ 636.1 billion (22% of total value), followed by the United States worth US $ 504.6 billion (18%), and the UK worth US $ 86.5 billion (3%).
Meanwhile, the value of e-commerce transactions in Indonesia is still below 1%, which is US $ 8.6 billion and is projected to reach US $ 22.6 billion by 2022. The Daily Investor Daily once recorded micro, small and medium enterprises (MSMEs) those who do e-commerce activities in 2018 are estimated to be around 7 million business people. The Central Bureau of Statistics (BPS) along with the National Development Planning Agency and the United Nation Population Fund estimate the number of MSME players in Indonesia to be around 59 million, which means that MSME players entering the e-commerce ecosystem reach 11.8%. The value of MSMEs contributed 64.5% of the value of GDP in 2017.
The value of Indonesia’s GDP in 2017 was US $ 1,016 trillion (equivalent to Rp. 13,588 trillion at an exchange rate of Rp. 13,374), which means the value of MSMEs was US $ 654 billion (equivalent to Rp. 8,750 trillion).
E-commerce is certainly not free from internet usage. The Indonesian Internet Service Providers Association (APJII) noted that the number of internet users in Indonesia reached 150 million in 2018 (57% of the total population) and is projected to touch 175 million in 2019 (64% of the total population). Based on this APJII survey, in 2017 the number of internet users in Indonesia accessing chat application services dominated by 89.3%, followed by social media 87.13%, search engines 74.84%, and e-commerce activities 40.2 %.
This picture shows that the economic cake from e-commerce transactions in Indonesia is still very large. The use of the internet for e-commerce activities has also not been fully dominated by buying and selling transactions.
APJII noted that this activity was still dominated by price seeking activities, which reached 45.14%, followed by seeking information to buy 37.8%. The activity of buying new digital goods contributes around 32.19%. Underneath it follows a job search activity at 26.19%.
The government is very concerned about expanding internet access to all parts of Indonesia to encourage the achievement of industry 4.0, one of which is based on the Internet of Things (IoT). The provision of internet access to the foremost, outermost, and disadvantaged areas (3T) is realized through electricity supply (electrification) to all households in Indonesia and the completion of the Palapa Ring fiber optic cable deployment project that will connect 4G internet networks to all over Indonesia.
The electrification ratio is currently at 97.5% and is targeted to reach 99% by 2019. The Palapa Ring project is projected to be completed by 2020, which will make the entire community independent of signals and the internet. The statistical data above confirms the tremendous magnitude of the potential economic value of e-commerce transactions which can be of more concern to the tax authorities to optimize state revenues so that the tax ratio is not ‘stuck’ at 11%.
This potential can be realized if there is consistency in fiscal support, regulation and infrastructure from the government that will further enlarge economic activity through e-commerce. Starting from the transfer of business players from the conventional market to the digital market, the preference of internet users to switch from just chatting or social media to buying and selling activities in the marketplace platform, even distribution of internet access to the whole country, to the emergence of new MSME players who are able to open the field work as wide as possible.
The government through the Ministry of Finance has issued a legal umbrella in the form of Minister of Finance Regulation (PMK) number 210 / PMK.10 / 2018 concerning Tax Treatment of Trade Transactions through the Electronic System which came into force on 1 April 2019. There is no new taxation in this rule.
Basically, since 2013, MSME players with gross circulation (turnover) of up to IDR 4.8 billion in one tax year are categorized as MSME taxpayers who are subject to a 1% Final Income Tax (PPh) deposited every month. Then, starting July 1, 2018, the government issued Government Regulation (PP) number 23 of 2018 which reduced the Final PPh rate from 1% to 0.5%.
The hope is that this tax cut will be able to encourage the contribution of larger MSMEs to the economy. In addition, this incentive is considered to penetrate MSME actors into large business actors whose turnover exceeds Rp 4.8 billion in one tax year.
Aside from being a stimulus, PP 23/2018 is the basis for fixing the taxation system in Indonesia. The ultimate goal, taxpayers (WP) will carry out bookkeeping (in the form of financial statements) or recording (in the form of norms for calculating net income) after the expiration of the period.
The period of the final PPh imposition, which is a maximum of 7 tax years for individual taxpayers, 4 tax years for corporate taxpayers in the form of cooperatives, partnership partnerships, or firms, and 3 tax years for corporate taxpayers in the form of PT. However, taxpayers may choose to be subject to a general tax rate in accordance with Article 17 or 31E of the Income Tax Act before the deadline by submitting a notification to the Director General of Taxes.
PMK 210/2018 is an effort to improve the compliance of e-commerce players to pay income tax and present equal treatment for entrepreneurs who trade in both conventional and digital markets. So far, there are many assumptions that transactions on e-commerce are not taxed. This is wrong.
Back to the beginning of this paper, basically digital and conventional transactions have the same underlying products so that both have the same tax obligations. In addition, PMK 210/2018 is also a legal basis for obtaining transaction data over a period of time from platform marketplace providers.
This rule targets two things. First, traders and service providers (such as expeditions) who transact in the marketplace will be asked to notify their NPWP to the platform market provider. If they do not have an NPWP, they can include NIK. However, both are not required to be attached if it is burdensome, especially for beginner traders such as housewives, students, or students whose income in the year is still below the PTKP.
Second, the owner or manager of the marketplace is required to collect, deposit and report VAT and Income Tax from traders, service providers, and providers of the marketplace platform itself. In addition, the marketplace platform must report data on recapitulation of transactions that occur to the tax authority.
Follow-up of the Tax Authorities
The assumption that so far the tax authority “missed” in e-commerce transactions is not true. Instead the shifting of the economic model from conventional to digital will greatly facilitate the tax authority in carrying out extensification, supervision and inspection.
The recapitulation data from the marketplace platform providers will be input for the tax authorities to appeal to e-commerce players to apply for NPWP (for those who have not yet had an NPWP) and test the correctness of the material for depositing PPh by taxpayers. As of December 2018, the total UMKM PPh payers reached 1.7 million WP with a nominal value of Rp. 5.37 trillion.
With the statistical data that I collected in this paper, the contribution of MSMEs to the economy reached 64%, equivalent to Rp. 9.555 trillion (GDP of Rp. 14,837 trillion) in 2018, which will result in the receipt of Final PPh of Rp. 47.7 trillion.
Meanwhile, the economic value of MSMEs in e-commerce only reached 11.8%, equivalent to Rp. 1,127 trillion. Assume all e-commerce players have a NPWP and deposit Final PPh, at least the revenue from e-commerce alone is Rp 5.67 trillion. It’s really a huge tax potential to be explored. However, this is only a simplified calculation. The big head of this rule is efficiency and justice. Efficiency is created because clearly and accurately recorded digital transactions will facilitate the tax authority to expand the tax base and test the truth of the implementation of tax obligations.
Justice is enforced for both conventional business people and ecommerce players who are no different. Both have the same tax obligations, namely Final PPh for taxpayers with business circulation under Rp 4.8 billion and VAT for taxpayers who have been confirmed as Taxable Entrepreneurs (PKP).
During this time, the self-assessment system is very possible to lose the potential tax because it is difficult to test the compliance and truth of the value of tax deposits by taxpayers. In addition to carrying out the functions of the budget (budgetair) and regulation (rutinend), taxes must also function as a tool for creating justice and redistribution of welfare.