Indonesia Wants Internet-Based Firms to Establish Local Entity or Be Blocked

Jakarta, 22 Jumadal Awwal 1437/01 March 2016 (MINA) – The world’s Internet giants that provide services in Indonesia (such as social media platforms) are encouraged to establish a permanent presence in Indonesia in the form of a representative office or foreign investment company (PT PMA) hence becoming taxable entities.

If not, their services can be blocked by Indonesian authorities. Finance Minister Bambang Brodjonegoro informed reporters about this plan on Monday (29/02).

Although he declined to mention any names, it is assumed Brodjonegoro refers to social media platforms and those that sell products/services to the massive online audience of Indonesia, Mi’raj Islamic News Agency (MINA) quoted Indonesia-investments.com as reporting.

Meanwhile, Ismail Cawidu, spokesman for Indonesia’s Communications Ministry, stated that his ministry plans to issue a new regulation that contains rules for those Internet-based firms that provide streaming and messaging to the Indonesian public as well as social media websites.

Failure to comply with new rules could mean that their bandwidth will be reduced or they can be blocked altogether. The new regulation could be issued in March 2016.

It seems that there are two issues behind these new plans of the Indonesian government. Firstly, Indonesia is eager to find new tax revenue streams as it needs to collect funds for massive spending on infrastructure and social development programs.

The online advertisement industry (particularly when it involves foreign websites) is one of the industries that has loopholes in existing regulations. Indonesia’s Communication Ministry estimates that digital advertising from Indonesia was worth approximately USD $800 million in 2015. However, this industry remains largely untaxed.

Cawidu cited national interests on taxes and controlling content related to terrorism and pornography as the main reasons for the regulation.

If they do not comply, Indonesia will reduce their bandwidth or block them entirely, Cawidu said, adding that there might be a transition period under the new rules. (R07/R01)

Mi’raj Islamic News Agency (MINA)