E-Commerce Tax: The State Must Do More Than Just Collect

Stupa News Editorial

Digitalization has transformed the way Indonesians do business. A store no longer has to be a physical building with a signboard on a roadside. Its storefront can now exist on a smartphone screen, transactions can take place within seconds, payments can be made digitally, and goods can be delivered to almost every corner of the country.

That transformation inevitably carries consequences: the state must adapt its tax system to the changing way people conduct economic activities.

Through Minister of Finance Regulation No. 37 of 2025, the government has established a mechanism for collecting Article 22 income tax through e-commerce marketplaces. The policy does not introduce a new type of tax. The government says income earned from business activities is already subject to tax obligations, while the regulation changes the collection mechanism — from being paid directly by merchants to being collected through marketplaces.

But this is where the larger question begins.

The state must not simply become better at collecting taxes. It must also become better at providing certainty, convenience and fairness to those who pay them.

It Is Not About the Tax, But How the State Collects It

There is, in principle, nothing unusual about the idea that economic activity carries tax obligations.

The challenge is how those obligations are implemented in a digital economy populated by millions of businesses with very different scales, profit margins, administrative capabilities and levels of tax literacy.

Under the regulation, Article 22 income tax is collected at a rate of 0.5% of the relevant gross turnover, subject to specific conditions.

The figure may appear small.

But for merchants operating on thin margins, facing logistics costs, marketplace fees, promotional expenses and intense price competition, every deduction matters.

That is why discussing e-commerce taxation cannot stop at saying that the rate is only 0.5%, or that the policy does not create a new tax.

The more important question is whether businesses understand what is being collected, why it is collected, how it is calculated, how it can be credited and what rights taxpayers have after the tax has been collected.

Turnover Must Not Be Confused With Profit

This is where government education becomes critical.

The tax collected through marketplaces is based on gross turnover under the applicable rules. In real business life, however, turnover is not the same as profit.

A merchant may record 100 million rupiah in sales, but that does not mean the merchant earns 100 million rupiah in profit.

There are the cost of goods, shipping, storage, promotional expenses, discounts, platform commissions and many other costs.

Therefore, government communication with small businesses should not stop at saying: "It is only 0.5%."

Business owners need to understand the broader mechanism.

The Directorate General of Taxes has explained that Article 22 income tax collected by marketplaces is not an additional type of tax. For eligible taxpayers, the amount collected can be treated as a reduction of final income tax or as a tax credit in their annual tax return, depending on the applicable tax regime.

This is the kind of information that must reach merchants in simple language, rather than merely through regulatory documents.

A tax system that is simple for the government is not necessarily simple for the people who have to understand it.

Small Businesses Should Not Have to Learn Through Mistakes

One issue deserves particular attention: protecting small businesses.

The Directorate General of Taxes says individual taxpayers with annual gross turnover of up to 500 million rupiah are not subject to the Article 22 collection through marketplaces, provided they meet the requirements and submit the required declaration.

But provisions such as these require sufficient tax literacy.

Small-business owners need to understand that the 500 million rupiah threshold is not necessarily calculated from a single online store. According to the tax authority, the relevant gross turnover covers the taxpayer's overall business activities, including both online and offline sales.

For entrepreneurs operating through several marketplace accounts, administrative requirements can become complicated if the rules are not clearly explained from the beginning.

This gives the government another responsibility that is just as important as collecting taxes: ensuring that people do not fall into administrative errors simply because they were not adequately informed.

Small merchants should not discover the rules only after making a mistake and then face administrative consequences that could have been prevented through proper education.

The Delay Should Be Used to Improve the System

The government has postponed implementation of the mechanism until Oct. 31, 2026. The collection is scheduled to begin on Nov. 1, 2026.

The Directorate General of Taxes has said the delay is intended to maintain purchasing power and does not change the substance of the policy.

The postponement should not be viewed merely as a change of date.

It should be used as an opportunity to improve the entire implementation chain.

Marketplaces must be ready.

The tax system must be ready.

Merchants must understand the mechanism.

Tax officials must be able to provide consistent answers.

And the public must know how to verify that the tax charged to their transactions is in accordance with the rules.

If these elements are not ready, the issue is no longer simply when the tax will take effect.

The larger question becomes how prepared the state is to manage the consequences of the policy.

Marketplaces Must Not Become Digital Tax Offices

There is another dimension that deserves attention.

Marketplaces are being given a role in collecting, remitting and reporting taxes.

Administratively, such a model can make tax collection more efficient. The government does not have to pursue every individual merchant conducting digital transactions.

But there is an obvious consequence: the greater the role of marketplaces in the tax system, the greater the need for procedural certainty, data accuracy and information protection.

A marketplace is a company operating a commercial platform.

It is not a government institution.

Therefore, the division of responsibilities between the government, marketplaces and merchants must be made as clear as possible.

System errors should not automatically become the merchant's responsibility.

At the same time, tax obligations should not become an excuse for platforms to impose additional procedures that make compliance unnecessarily confusing.

Taxes Must Build Trust, Not Just Revenue

This is the heart of the issue.

Taxes are not merely numbers on a government revenue statement.

Taxation represents a relationship between the state and its citizens.

When the state asks people to pay taxes, citizens are also entitled to ask: Is the system fair? Are the rules clear? Is the money collected managed responsibly? Are public services improving?

Such questions should not be interpreted as rejection of taxation.

Quite the opposite.

People who understand the tax system and trust it are more likely to accept their tax obligations.

Building compliance therefore requires more than strengthening collection mechanisms.

Compliance is also built through legal certainty, public services, transparency and consistency.

The state must not appear only when a transaction takes place and tax needs to be collected.

It must also be present when businesses need certainty.

When they need education.

When a system error occurs.

When a dispute arises.

And when they want to understand where Indonesia's digital economy policies are heading.

Do Not Discourage People From Becoming Entrepreneurs

The digital economy has created opportunities for millions of people to start businesses with relatively small amounts of capital.

A homemaker can operate a store from home.

A young entrepreneur can sell local products to consumers in another province.

A craftsman in a remote area can reach markets that were previously beyond imagination.

That is one of the positive sides of digitalization that must be protected.

Regulations designed to bring order to the digital economy should not make prospective entrepreneurs feel that entering the formal economy is simply too complicated.

Taxation should be part of the process of moving businesses into a more formal and sustainable stage.

It should not become a barrier that encourages people to remain outside the formal system.

The government therefore needs to pursue two objectives simultaneously: expanding tax compliance while making compliance easier.

The two cannot be separated.

The State Must Pursue Fairness, Not Merely Numbers

The government says one of the objectives of the regulation is to create more equal tax treatment between digital and conventional businesses.

That objective is understandable in the context of modernizing the tax system.

But tax fairness does not end with the question of whether everyone is subject to taxation.

Fairness also concerns whether the system takes taxpayers' circumstances into account, provides sufficient information, offers mechanisms for correction and ensures that no one is unfairly harmed by administrative errors.

In other words, fairness is not simply about collecting taxes from as many transactions as possible.

Fairness means ensuring that every collection has a clear legal basis and that every taxpayer understands both their rights and obligations.

An Opportunity to Build a Healthier Digital Economy

Indonesia cannot avoid the digitalization of its economy.

Transactions will become increasingly digital. Payments will become more integrated. Trade data will grow. Marketplaces will continue to expand.

The tax system must evolve with them.

But that evolution must move together with improvements in public services.

The government has an opportunity to make e-commerce taxation more than a revenue instrument. It can become part of building a more orderly and sustainable digital economy.

That means not merely expanding tax collection.

It means ensuring that regulations are easy to understand, systems are trusted, correction mechanisms work, data is protected, and small businesses are not left behind.

Ultimately, a strong state is not one that is simply the most successful at collecting taxes.

A strong state is one that can explain why taxes must be paid, ensure that collection is fair, manage public revenue responsibly and return it to society through public benefits that people can actually experience.

As Indonesia approaches the implementation of Article 22 income tax collection through marketplaces on Nov. 1, 2026, the message should not be directed only at merchants.

It should also be directed at the state:

Do not just become better at collecting. Become better at providing certainty, serving, protecting and being accountable.

Because tax compliance is built not only through regulation. It is built through trust.

— Stupa News Editorial