Instagram Stars Beware: Indonesia’s Taxmen Are Coming for You

  • Online merchants, social-media endorsers are targets of hunt
  • Government aims for $1.2 billion of revenue from the push

Indonesia Targets Social Media for Tax Revenue

In Indonesia’s hunt for tax revenue, social media is the new battleground.

The Southeast Asian nation plans to crack down on Instagram Inc. stars and merchants peddling goods and services on Facebook Inc., KASKUS forum and other social media, a strategy that could yield as much as $1.2 billion of revenue, said Yon Arsal, director of tax revenue and compliance.

“Online marketplaces, daily deals, direct sales and endorsers are all subject to taxation if they have income to report,” Arsal said in an interview at his office in Jakarta on Tuesday. “We’re in discussion to decide how to enforce this in the most effective way and whether we will set different rates for this type of business.”

President Joko Widodo is accelerating efforts to boost revenue to help finance billions of dollars in infrastructure projects as the economy struggles in the face of weak commodity prices and sluggish consumer demand. He spearheaded a tax amnesty program that’s already drawn in 97.4 trillion rupiah ($7.5 billion) to government coffers since it began in July. The government faces an estimated revenue shortfall of 218 trillion rupiah this year.

Social media has become an active marketplace in Indonesia with vendors offering goods from Chanel bags to homemade dog biscuits and the latest iPhone 7, often without declaring incomes. The tax office seeks to earn 10 trillion rupiah to 15 trillion rupiah each year by enforcing value-added and income taxes on these merchants.

Endorsement Deals

The government will also impose levies on endorsement deals signed by social media stars, who are paid by companies to advertise their products to followers, Arsal said. Authorities plan to compare the income disclosed in their tax reports with activity on social media accounts, he said. Currently, only online businesses with at least 4.8 billion rupiah of revenue a year are subject to taxation.

The Finance Ministry will seek help from the Communications and Information Technology Ministry to track online sales and transactions, Arsal said.

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