E-Commerce Tax Reform Focuses on Protecting Small and Medium Enterprises
By: Mahmud Sutramitajaya
The government continues to strive to build a fairer and more inclusive tax system, especially amidst the rapid development of the digital economy. One of the latest strategic steps is e-commerce tax reform, designed with a primary focus on protecting micro, small, and medium enterprises (MSMEs). The government ensures that this policy will not burden small and micro enterprises, ensuring their business continuity.
The Ministry of Trade (Kemendag) emphasized that the imposition of taxes on businesses on e-commerce platforms does not pose a threat to MSMEs. This policy, in fact, provides equal treatment between online and offline merchants, allowing small and medium enterprises to thrive by fulfilling their tax obligations fairly.
The Director General of Domestic Trade (Dirjen PDN) at the Ministry of Trade, Iqbal Shoffan Shofwan, stated that the implementation of this tax is adjusted to the annual turnover of businesses. Merchants with a turnover of less than IDR 500 million per year are not subject to additional income tax from e-commerce sales. Thus, MSMEs whose average turnover is still below this threshold remain protected and can operate their businesses without the burden of additional taxes.
Iqbal also emphasized that this policy is quite fair because it targets small and medium enterprises that already have higher turnover. This demonstrates that the government differentiates tax treatment based on business scale, ensuring that the policies implemented are proportional and fair.
A concrete step in implementing this reform was the issuance of Minister of Finance Regulation (PMK) Number 37 of 2025. Minister of Finance Sri Mulyani Indrawati signed the PMK on June 11, 2025, and the regulation officially came into effect on July 14, 2025. This PMK stipulates marketplaces (e-commerce platforms) as collectors of Article 22 Income Tax (PPh) from online merchants with a certain turnover.
Minister of Finance Sri Mulyani stated that the implementation of this policy is an important step in creating a fair and equitable tax system, while also protecting MSMEs from excessive tax burdens. According to him, this policy also helps strengthen governance of the rapidly growing digital economy in Indonesia.
The regulation stipulates that the PPh 22 levy is 0.5% of a merchant’s gross annual turnover. This levy is distinct from Value Added Tax (VAT) and Luxury Goods Sales Tax (PPnBM), ensuring transparent and fair taxation.
The primary target of this policy is online merchants with annual turnover exceeding IDR 500 million. Merchants who meet the criteria are required to submit a recent turnover declaration to the designated marketplace. Businesses with turnover below IDR 500 million receive a full exemption from this levy, protecting MSMEs still in the development stage from additional tax burdens.
Furthermore, the government provides special exemptions for several types of transactions, such as online shipping and transportation services (including online motorcycle taxis), mobile phone credit sales, and gold trading. This aims to alleviate the burden on the lower-level sectors of the digital economy and ensure easy access to digital services for the public.
This tax reform is also part of the government’s efforts to encourage the digitalization of MSMEs so they can further develop and compete in national and global markets. With a fairer and more measurable tax system, it is hoped that online businesses will be more compliant in fulfilling their tax obligations without being burdened by excessive levies.
This effort also supports the achievement of the national development goal of strengthening the tax base in an inclusive and sustainable manner. By imposing taxes on established businesses with larger turnover, the government can increase state revenue without hindering the growth of small and micro businesses.
Protection for MSMEs is crucial, given that this sector is the backbone of the national economy. MSMEs contribute a significant portion of employment and contribute to Gross Domestic Product (GDP). Therefore, tax reform that does not burden them is crucial for creating a healthy and sustainable business ecosystem.
With clear regulations and consistent enforcement, e-commerce tax reform opens opportunities for online businesses to contribute optimally to state revenue. This policy also creates a conducive and equitable business climate, providing equal opportunities for all businesses to grow and develop.
