Indonesia says Google can operate in country but it must pay due taxes

THE INDONESIAN government will ensure the US-based technology giant Google can operate its business freely in the country if it complies with the tax laws and regulations, Finance Minister Sri Mulyani Indrawati said.
She asserted that the government would always welcome any corporate activity into the country and did not expect to disrupt the investment climate. However, the state also had the right to collect taxes fairly, as the company had also benefited from its business in the country.
The tax office has pledged to step up investigations into the Indonesian operations of Google after the company declined to pay the tax arrears demanded by the government. Acknowledging the company’s role in bringing a number of technological benefits to Indonesia, Sri Mulyani insisted the “unprecedented measure” must be carried on.
“I want to build trust. You run a business in Indonesia and create value, thus I will respect every investment you put into here, but at the same time if there is an economic value coming from your business activity here, Indonesia must strive for its right” to impose taxes,” she said.
Recent negotiations between the company and the tax authority failed because of the low payment offered by the technology behemoth in comparison with what the tax office found to be the company’s earnings.
Amid the government’s dire need for new tax sources and a boost in state revenues, the tax office has estimated that Google owes about 5 trillion rupiah (Bt13.37 billion) in back taxes and penalties. The tax office has served Google with a summons for January related to its investigation into the company’s financial reports, including its overall transactions in Indonesia. The company will be requested to pay its due taxes with a 150-per-cent penalty.
If the company rejects the government’s request, the tax authority will carry out a full investigation and apply a blistering 400-per-cent fine as stipulated in the General Taxation System Law.
Sri Mulyani said she had ordered the Finance Ministry’s Directorate General of Taxation to investigate and continue communicating with the company in preparation for more a detailed discussion next year regarding the basis of the calculations.
“The government has done many reviews on the estimated volume and values of Google’s transactions, while the company also has its own version. However, in the end, both parties will hold one set of data that can illustrate a verified, credible and legitimate value,” she said.
Sri Mulyani said she was optimistic that Google would understand and respect the government’s intention, so that it would help both parties to stand on the same ground regarding the process.
Previously, tax director-general Ken Dwijugiasteadi said executives handling the Indonesian operations of Google might face criminal charges and possible imprisonment if the firm were found guilty of tax evasion, as there had always been equal treatment for all taxpayers in the country.
Indonesia, which has a low tax-to-gross domestic product ratio of 11-12 per cent compared with its regional peers, will also go after social-media giant Facebook to make it pay its proper taxes for its local operations.