Trade Agreement with the US: Indonesia Cannot Impose Digital Taxes on US Companies
JAKARTA. The reciprocal trade agreement between Indonesia and the United States (US) has brought new implications for Indonesia’s digital taxation policy. Through the Agreement on Reciprocal Trade (ART), the Indonesian government has committed not to impose income tax or digital service taxes that discriminate against US digital companies, such as Google, Meta, Netflix, and Amazon.
This commitment is stated in the agreement document, particularly in provisions concerning digital trade and technology. Article 3.1 stipulates that Indonesia may not impose digital service taxes that legally or practically differentiate treatment toward entities originating from the United States.
“Indonesia shall not impose digital service taxes, or similar taxes, that discriminate against United States companies, either in law or in practice,” states Article 3.1 Section 3 of the official ART agreement document.
This provision aligns with the long-standing stance of the US government, which has opposed digital service tax (DST) policies in various countries. US President Donald Trump had even threatened to impose additional tariffs on countries that continue to apply digital taxes to US technology companies.
“With this, I affirm to all countries with digital taxes, laws, rules, or regulations that unless these discriminatory measures are removed, I, as President of the United States, will impose substantial additional tariffs on exports from those countries to the United States, as well as restrict exports of our advanced technology and high-standard chips,” Trump wrote in a social media post in 2025, as quoted by Bisnis.com.
Fiscal Consequences
The agreement is considered to have fiscal consequences for Indonesia. Nailul Huda, Director of Digital Economy at the Center of Economic and Law Studies (Celios), estimates that potential state revenue from digital taxes that could have been collected ranges between IDR 15 trillion and IDR 29.5 trillion per year.
“Not only could state revenue become less optimal, but the governance of the digital economy could also be affected,” he said, as quoted by Kontan.co.id.
According to Huda, many foreign digital companies have not fully paid taxes in Indonesia due to various factors, such as the absence of a physical presence in the country or protections provided by international agreements. With the limitations introduced in the trade agreement, the government’s room to collect taxes from the sector may become narrower.
However, the government emphasized that the impact may not be as significant as feared. Febrio Nathan Kacaribu, Director General of Economic and Fiscal Strategy at the Ministry of Finance, explained that the digital tax referred to in the agreement differs from existing tax policies implemented in Indonesia.
“This needs to be distinguished between digital taxes and taxes that are in accordance with Indonesia’s existing laws and regulations. For example, VAT on Electronic Commerce (PMSE VAT) is not a digital tax,” he said, as quoted from the Ministry of Finance’s YouTube account.
According to Febrio, the digital tax in question would only target a limited number of global technology companies.
“This is limited to several dozen companies such as Google, Netflix, and others. Its impact on Indonesia’s tax revenue is therefore very limited. However, PMSE VAT will continue to be collected because it is non-discriminatory in nature,” he emphasized.
This means the government can still collect general taxes, including VAT on Electronic Commerce (PMSE VAT), which by 2025 had contributed tens of trillions of rupiah to state revenue. (KEN)
