Indonesia's directorate general of taxation inspects local offices of international technology giants Google, Facebook, Twitter and Yahoo, regarding alleged unpaid taxes.
Finance Minister Bambang Brodjonegoro said evidences showed that the four tech companies should have established permanent establishments in Indonesia, but opted not to do so in order to avoid paying taxes.
"The tax office will look into the back taxes of their business units. The companies earn income from Indonesia from advertising services, but listed them as the income of their Southeast Asia headquarters in Singapore," said the Minister.
A permanent establishment is a fixed place of business that is used by an individual or company which generally gives rise to income or value-added tax liability. Most multinational corporations choose to open representative office in other countries to have lower taxes.
Yahoo! has a company registered in Indonesia with the name PT Yahoo Indonesia. The office acted as a dependent agent to the company's Singapore headquarter Yahoo Singapore Pte Ltd. Google goes with the name PT Google Indonesia, acts as a dependent agent of Google Asia Pacific Pte Ltd.
Facebook and Twitter have representative offices in Indonesia. They have registered their offices in February 2014 and April 2015, respectively.
"They are supposed to pay taxes based on their income in Indonesia," said Tax office head Ken Dwijugiasteadi. He added that the government would go after them due to their profitable operations in the country.
The attempt is also in line with Indonesia's strategy to widen its tax net income.
