Bappenas Considers Incentives for Foreign OTT Firms to Establish Local Offices

Indonesia’s Ministry of National Development Planning (PPN)/Bappenas is actively exploring the provision of incentives for global Over-the-Top (OTT) service providers willing to deepen their commitment within the country. This initiative is primarily targeted at companies prepared to establish representative offices and substantially increase their domestic investments.

Bappenas underscores the critical importance of fostering a fair and competitive business environment for both local digital players and international technology giants operating in the lucrative Indonesian market. According to Reza Adityan, Head of the Digital Economy Team at the Ministry of PPN/Bappenas, a noticeable disparity currently exists between national businesses and global digital platforms.

Local enterprises are obligated to adhere to a comprehensive array of regulations, encompassing taxation requirements, legal compliance, infrastructure development contributions, and job creation initiatives. Conversely, a number of global corporations reportedly accrue substantial revenues from the Indonesian market without making comparable contributions. “What we truly desire is a level playing field. If they are willing to adapt to our conditions, that’s acceptable, but it would involve potential taxation schemes and other mechanisms. If they wish for tax reductions, then they should establish offices here, where other incentive mechanisms can be applied,” Reza explained during a Celios discussion titled “Dissemination of Over-the-Top (OTT) Industry Governance Study Results” in Jakarta on Tuesday (2/6).

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Beyond platform-centric policies, Bappenas advocates for a holistic approach to the digital industry. The government needs to consider the entire digital economy value chain, spanning content creators, production houses, creative economy actors, and various supporting sectors that contribute to the industry’s overall growth. “Therefore, we believe the ecosystem should be expanded comprehensively,” Reza added, emphasizing the ministry’s broad vision.

In a related statement, Rolly Rochmad Purnomo, Secretary to the Deputy for Economy and Digital Transformation at the Ministry of PPN/Bappenas, highlighted that Indonesia’s rapid digital economic growth must be complemented by robust governance capable of generating greater national benefits. He stressed that optimizing digital revenue, including through corporate digital income tax schemes, should be an integral part of the national strategy. Furthermore, the government must ensure the creation of a level playing field that supports balanced OTT regulation for all industry participants.

“The continuously growing performance of the digital economy, amid the significant digital investment burden borne mostly by national companies and the lack of physical presence obligations for global players, necessitates a government strategy focused on optimizing digital revenue, including corporate digital income tax,” Rolly elaborated.

Proposal for OTTs to Pay USO

The Center of Economic and Law Studies (Celios) has put forth a proposal advocating for global Over-the-Top (OTT) platforms, such as Google, Meta, and Netflix, to contribute to national digital infrastructure development through a Digital Universal Service Obligation (USO) scheme. This proposition arises amidst Indonesia’s booming digital economy, where the fiscal contributions from global technology companies are perceived as not yet commensurate with their market gains.

In its recent study titled “Over-The-Top Industry Governance in Indonesia,” Celios asserts that the financial burden of digital infrastructure development has predominantly fallen upon telecommunication operators and the government. Meanwhile, OTT platforms are the primary beneficiaries, extensively utilizing these networks for their business operations. Nailul Huda, Director of Digital Economy at Celios, pointed to the significant investments telecommunication operators must undertake to build and maintain digital networks, underscoring this imbalance.

“More than 77% of digital taxes are paid by our consumers through value-added tax (VAT), while Google, Meta, and Netflix deposit almost no corporate income tax (PPh) into the state treasury. This is a very regressive and unfair tax,” Huda stated, highlighting the inequity of the current system. He further noted that Indonesian telecom operators are compelled to invest 17.2% of their revenue into developing digital infrastructure. In stark contrast, OTT platforms, which extensively leverage this network, do not bear a comparable obligation. Consequently, Celios suggests rectifying this situation by expanding the existing USO scheme, which has historically been exclusively imposed on domestic telecommunication operators. To this end, Celios proposes a Digital USO tariff of 0.75% of the gross revenue generated by foreign OTT platforms operating in Indonesia.