Indonesia to require content providers to form local entities

The Indonesian government  will soon require messaging services and global providers of online content such as Netflix to establish local legal entities and start paying tax.

Minister of Communications and Information Technology Rudiantara warned companies that fail to comply with the new policy would have their services blocked, according to local media reports.

Rudiantara said that his ministry was working on a ministerial regulation  and he expected it would be ready by the end of March.

YouTube, Netflix, WhatsApp and Apple Music are among such services. These services use internet or bandwidth provided by Indonesian telecommunication companies as their infrastructure but do not pay tax or service fees to the Indonesian government or the internet providers.

“There will be punishment if they don’t comply. We can just block them from the operators,” Rudiantara was quoted as saying by Bisnis.com.

He said the government policies in the telecommunications sector had been  too lenient.

Rudiantara urged content companies to establish joint ventures or work closely with local mobile operators instead of simply establishing local offices.

The minister said the new policy will not only protect consumers but also increase tax revenue.

He pointed out that in 2015 revenue from digital advertising was worth  US$ 430 million.

According to 2015 data from the center of communication study (PUSKAKOM) from University of Indonesia, there are 88.1 million of active Internet users in Indonesia, 85 percent of whom connect to the internet via smartphones.

State-owned telecommunications and internet provider Telekomunikasi Indonesia (Telkom) blocked Netflix from all of its platforms in January soon after the US online movie provider announced an international rollout, triggering criticism from Indonesian users.

Telkom said the service was blocked because no system was in place to censor unsuitable content for the local market and urged the company to cooperate with fixed broadband providers in Indonesia, citing similar arrangements with Singapore’s Singtel.

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