JAKARTA: Indonesia is widening its tax net to target global technology giants like Google and Facebook Inc., a strategy that’s raising red flags for fear it may deter foreign investment.
Finance Minister Sri Mulyani Indrawati is seeking to squeeze more revenue out of an economy that’s been hit by weak commodity prices and subdued demand from China, Indonesia’s biggest trading partner. Halfway through a tax amnesty plan, the government has raised almost 100 trillion rupiah ($7.4 billion) in income from penalties and is now turning its focus to companies like Apple Inc., Twitter Inc. and Yahoo! Inc.
The latest salvo from the tax office underscores the challenge President Joko Widodo faces in funding his ambitious infrastructure goals, and the risk that it may backfire by scaring off investors.
“We’re just looking for fair treatment,” said Lin Neumann, managing director of the American Chamber of Commerce in Indonesia. “The concern is that if companies feel that they’re spending an enormous amount of time in negotiations over tax assessments that go beyond what they believe they have agreed to in their contracts and under the law, then that can hurt foreign investment.”
If companies “end up in a kind of red-tape situation, that is not conducive to making plans for growth,” he said. “Ultimately, that situation hurts Indonesia.” The chamber helps to promote U.S. businesses in Indonesia, and Google is among its members.
