Indonesia Plans to Require E-commerce Platforms to Withhold Sales Tax from Small and Medium Sellers; Platforms Oppose the Policy

June 25 - Indonesia is planning to introduce a new regulation that will require e-commerce platforms such as TikTok Shop, Shopee, and Lazada to withhold 0.5% sales tax from small and medium-sized sellers with annual turnover ranging from 500 million to 4.8 billion Indonesian rupiah (approximately 30,000 to 300,000 US dollars). The move aims to alleviate the country's weak tax revenue and balance competition between physical stores and e-commerce businesses.

It is reported that the policy could be implemented as early as next month. However, the plan has been opposed by e-commerce platforms. They argue that withholding sales tax will increase operational costs and further squeeze the profit margins of small and medium-sized sellers, who are already under survival pressure, thereby negatively impacting the e-commerce ecosystem.

In terms of the background, Indonesia's tax situation is not optimistic. Tax revenue in the first five months of this year fell 11.4% year-on-year, resulting in significant fiscal pressure. At the same time, the country's e-commerce market is growing rapidly, with its scale expected to reach 150 billion US dollars by 2030. The Indonesian government hopes that the new regulation will not only increase tax revenue but also prevent e-commerce from excessively squeezing the living space of physical businesses due to tax advantages.

Notably, Indonesia once introduced a similar policy, but it was eventually withdrawn due to strong opposition from the industry. Whether the new regulation can be smoothly implemented and effectively enforced remains to be seen. Market analysts believe that the promotion of the policy will test the game between the government and the e-commerce industry, and its final effect will also have an important impact on the future development of Indonesia's e-commerce market.