Trump's Digital Tax Investigation Order: France And India Inflamed, Indonesia No Comment

Illustration. (Photo: Unsplash)

JAKARTA - Several countries have criticized the investigation by the United States (US) government into the application of taxes for digital services around the world. The investigation - according to one of the critical countries, France - runs counter to calls for unity between the G7 nations.

"There is a real contradiction between the US demanding unity in the G7 and the possibility of new trade sanctions," said French Finance Minister Bruno Le Maire after the G7 conference, quoted by Bloomberg, Friday, June 5.

The G7 is a meeting of the strongest industrial, political and economic countries in the world. These countries are: France, Germany, Italy, Japan, UK, United States and Canada. The European Union is present as the eighth member.

The French and US governments previously agreed to a peace deal earlier this year over the French digital services tax dispute. In the agreement, Washington agreed to postpone sanctions and Paris to suspend digital taxation.

France will return to collecting taxes at the end of the year if there is no agreement in talks at the Organization for Economic Co-operation and Development (OECD) on new global tax rules.

"We will not give up on anything regarding digital taxes. I have asked the G7 countries to speed up negotiations in the OECD for an international solution by the end of 2020," said Le Maire.

Meanwhile, India will defend its decision to expand digital services tax despite the US launching an investigation. According to a source with knowledge of the matter, the Government of India is not changing its stance to include electronic commerce as a tax object.

The broader taxation was announced in Prime Minister Narendra Modi's latest budget in February and has become effective. While maintaining its tax policy, India will still negotiate with the US to prevent the imposition of retaliatory tariffs if the United State Trade Representative concludes New Delhi discriminates against US companies.

As for the Indonesian government, it continues to discuss technical rules for imposing value added tax on transactions of digital goods and services from abroad. Head of the Ministry of Finance's Fiscal Policy Agency (BKF Kemenkeu) Febrio Kacaribu said he did not want to comment further on Trump's statement.

Febrio said this problem was a strategic matter. So, his party has not been able to provide a response regarding the digital tax investigation.

"Regarding that, we cannot release a statement yet," he said in a video conference with reporters, Thursday, June 4.

Even so, Febrio said, the government will immediately issue an official statement regarding this matter.

For your information, this investigation will be carried out in Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey and the UK. Currently, the US Department of Commerce has requested consultations with the governments of these countries.

Previously, the Director of Counseling, Services and Public Relations at the Directorate General of Taxes (DJP) Hestu Yoga Saksama said the government had determined VAT collection on the sale of digital goods and services through foreign merchants or service providers. This rule takes effect from July 1, 2020.

This VAT collection will be carried out as early as August 2020. This is expected to give enough time for both foreign digital product business actors and DGT to be able to prepare a collection, payment, and reporting system that is easy, simple, and efficient.

With this provision in effect, VAT is imposed on digital products, such as music streaming subscriptions, streaming movies, applications, digital games, and foreign online services. DGT will treat it the same as various conventional and digital products sold by domestic business actors.