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Indonesia plans to ban social media transactions, drawing criticism from TikTok

Indonesia faces backlash from TikTok as it plans to separate social media and e-commerce platforms, citing potential harm to local businesses.

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1 year ago

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INDONESIA: The Indonesian government’s proposal to ban buying and selling transactions on social media has sparked criticism from TikTok, an app frequently used by its users as a platform for e-commerce.

This move comes after several government officials in recent weeks have called for the separation of social media and e-commerce, alleging that social media apps like TikTok engage in monopolistic practices that threaten local businesses and small enterprises.

In a parliamentary hearing on Tuesday (12 Sep), Deputy Minister of Trade Jerry Sambuaga stated that the Indonesian government plans to prohibit the sale of goods on social media based on the latest trade regulations.

The current trade regulations do not specifically address transactions on social media, and Jerry emphasized that the ongoing revision of trade regulations would explicitly prohibit such activities.

Furthermore, Jerry pointed out that there are currently few regulations regarding e-commerce on social media platforms. Therefore, changes are being made to the existing trade laws to address this issue.

“Social media and social commerce cannot be combined,” he asserted, citing the numerous sellers who use the “live” feature on TikTok to market their products.

Over the past year, social media users in Indonesia have spent more money on TikTok than in any other Southeast Asian country. This is in tandem with the rapid growth of e-commerce features within the app since its launch in 2021, attracting millions of sellers to capture a substantial regional market share.

Meanwhile, Trade Minister Zulkifli Hasan told reporters on Monday (11 Sep) that the law revision would require companies to apply for separate licenses for social media and e-commerce operations.

Zulkifli Hasan mentioned that the Ministry of Trade has developed policies to regulate TikTok Shop, aiming to protect domestic industries, especially micro, small, and medium-sized enterprises (MSMEs).

He disclosed that he had met with numerous domestic entrepreneurs who expressed concerns about the negative impact of TikTok Shop on their businesses.

“Many have approached me – beauty, MSMEs, fashion, you name it. They say they are facing a massive influx from abroad. So, we need to address this,” Zulkifli Hasan stated on Monday (11 Sep).

Currently, the Ministry of Trade has drafted regulations, and the next steps involve discussions and consultations with other relevant ministries. Afterward, it will be forwarded to the State Secretariat Ministry for harmonization with existing regulations.

The Ministry of Trade has proposed several key points regarding TikTok Shop policy, including allowing the sale of products that Indonesia cannot produce, prohibiting the use of a single license for both social media and e-commerce, requiring products for sale to have standard permits or Indonesian National Standards (SNI), and imposing a minimum USD 100 purchase for imports in a single transaction.

Minister of Cooperatives and SMEs Teten Masduki also stressed that companies should not merge social media and e-commerce and warned against TikTok becoming a “monopoly.”

This Indonesian move follows bans imposed by several other countries, including the United States and India, on TikTok conducting both social media and e-commerce businesses concurrently. In contrast, Indonesia allows TikTok to operate both businesses simultaneously.

However, TikTok can still engage in sales but not combine them with social media activities to prevent monopolistic practices that harm domestic MSMEs. Minister Teten explained that research showed that online shopping was influenced by social media interactions, and TikTok‘s control over payment systems and logistics created a monopoly.

Additionally, Minister Teten plans to regulate cross-border commerce to ensure domestic MSMEs can compete in Indonesia’s digital market.

Foreign retailers will be required to go through the standard import process before selling their products in the Indonesian digital market. This aims to level the playing field, as Indonesian MSMEs must navigate permits, Indonesian Nationa Standard (SNI), halal certification, and more.

Moreover, Minister Teten emphasized the need for the government to restrict imports of products that can be manufactured locally, regardless of their price. This will encourage domestic production by Indonesian MSMEs.

On Wednesday (13 Sep), TikTok criticized Indonesia’s policy to ban social media transactions, asserting that separating social media and e-commerce into different platforms would hinder innovation.

TikTok Indonesia spokesperson Anggini Setiawan stated, “Forcing the separation of social media and e-commerce into different platforms not only hampers innovation but also harms traders and consumers in Indonesia,” as quoted by Reuters. Anggini also called on the Indonesian government to “provide equal competitive space” for TikTok.

According to TikTok, the app boasts 325 million active users in Southeast Asia each month, with 125 million in Indonesia alone. Presently, there are two million small businesses on TikTok Shop in Indonesia.

As of now, Meta, the parent company of social media giants Facebook and Instagram, which also operate e-commerce platforms, has not issued a response to these developments.

E-commerce transactions in Indonesia accounted for nearly USD 52 billion last year, with TikTok accounting for 5% of these transactions, primarily through live-streaming platforms.

Nailul Huda, an economist from the Institute for Development of Economics and Finance (INDEF), noted that social commerce is challenging to regulate completely due to the nature of social media interactions. However, he emphasized the importance of regulating social commerce similarly to e-commerce, especially regarding taxation.

Regarding the potential impact on local MSMEs, Huda focused on imports. He distinguished between two types of imported goods in the online market: cross-border commerce and products sold by local sellers using domestic shipping.

While the policy of restricting imports to products under USD 100 would be effective for cross-border commerce, it would not significantly impact the latter category.

Huda added that if imports were to occur, they should follow the standard import process rather than going through e-commerce platforms. This would add value to trade. He also stressed the importance of the government’s role in regulating product prices for imported goods.

Huda concluded that prohibiting sales on TikTok Shop was unlikely, as social commerce has existed for a long time in Indonesia through platforms like Kaskus.

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Economy

IRAS reports S$80.3 billion in tax revenue for FY2023/24, a 17% increase from the previous year

The Inland Revenue Authority of Singapore (IRAS) collected S$80.3 billion in tax revenue for FY2023/24, a 17% increase from the previous year. The rise reflects strong corporate earnings, higher wages, and increased consumer spending, contributing to essential services and economic development.

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2 weeks ago

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4 September 2024

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The Inland Revenue Authority of Singapore (IRAS) reported a total tax revenue collection of S$80.3 billion for the Financial Year (FY) 2023/24, marking a 17% increase from FY2022/23.

The rise is attributed to the country’s strong economic growth and nominal wage increases in 2022.

This revenue constitutes approximately 77.6% of the Singapore Government’s Operating Revenue and 11.9% of the nation’s Gross Domestic Product (GDP). The taxes collected will be used to fund essential services, support social development programmes, grow the economy, and enhance Singapore’s living environment.

In addition to tax collection, IRAS processed close to S$2.3 billion in enterprise grants, benefiting over 131,000 businesses and workers. The arrears rate for Income Tax, Goods and Services Tax (GST), and Property Tax remained low at 0.64%.

Breakdown of Tax Revenue

Corporate Income Tax (CIT) showed the largest increase, rising by 25.6% from S$23.1 billion in FY2022 to S$29.0 billion in FY2023, due to strong corporate earnings. CIT accounted for 36.1% of total revenue collection.

Individual Income Tax (IIT) accounted for 21.8% of the total, with revenue increasing by S$2 billion to S$17.5 billion, driven by higher wages and an increase in the number of taxpayers.

GST contributed 20.7% of the total revenue, with collections rising by S$2.6 billion to S$16.6 billion, a result of higher consumer spending and the increase in the GST rate.

Property Tax contributed 7.4% (S$5.9 billion), and Stamp Duty accounted for 7.2% (S$5.8 billion), though Stamp Duty saw a decline of S$0.1 billion due to lower property transaction volumes.

S$2.3 Billion in Enterprise Grants Processed

IRAS also disbursed S$2.3 billion in grants to support businesses and workers under several schemes, including the Progressive Wage Credit Scheme (PWCS), Senior Employment Credit (SEC), and Jobs Growth Incentive (JGI). These grants were designed to assist businesses in maintaining operations and supporting workers’ employment.

Digital Solutions for Businesses

IRAS continues to enhance digital solutions to facilitate tax compliance for businesses.

Initiatives include:

  • InvoiceNow: This e-invoicing system, set to become mandatory for GST-registered businesses starting in November 2025 for new GST registrants, allows for seamless transmission of invoice data to IRAS for tax administration.
  • One-Stop Payroll (OSP): Developed in collaboration with the Central Provident Fund Board, Ministry of Manpower, and GovTech, this system allows businesses to submit wage-related information to various agencies through a single platform. These initiatives build on IRAS’ existing digital services, such as the Submission of Employment Income API.

To date, over 120 software providers have partnered with IRAS, offering 46 software products designed to simplify tax filing and payments for businesses.

In FY2023/24, it audited and investigated 9,590 cases, recovering approximately S$857 million in taxes and penalties from non-compliant taxpayers.

IRAS aims to ensure timely tax filing and payment while addressing tax avoidance and evasion.

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Economy

Singapore faces 25% increase in bankruptcy filings during first half of 2024

Bankruptcy cases in Singapore surged in the first half of 2024, with 2,334 filings—a 25% increase from 2023. The number of undischarged bankrupts reached 9,903, reflecting ongoing financial challenges and highlighting a rise in bankruptcy orders and applications.

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3 weeks ago

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2 September 2024

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Singapore faces 25% increase in bankruptcy filings during first half of 2024
(photo for illustration purposes only/Unsplash)

SINGAPORE: Bankruptcy cases in Singapore surged in the first half of 2024, with 2,334 individuals filing for bankruptcy—a 25% increase compared to the same period in 2023, according to data from the Ministry of Law (MinLaw).

The rise in filings highlights the ongoing financial challenges faced by many in the country.

The total number of undischarged bankrupts reached 9,903 as of 30 June, marking a 2.4% increase since January.

Additionally, 594 individuals were declared bankrupt between January and June 2024, an 11% rise from the previous year.

May recorded the highest number of bankruptcy applications, with 430 cases, followed by January with 409.

In comparison, May 2023 saw 314 applications, while the highest figure for the first half of 2023 was 356 in March.

Bankruptcy orders also increased, with 595 orders issued in the first half of 2024, compared to 537 during the same period in 2023.

Under Singapore law, individuals with at least S$15,000 (US$11,480) in unpaid debts can file for bankruptcy in the High Court.

The process requires a deposit of S$1,850 (US$1,415) to the Official Assignee for the administration of the bankrupt’s estate.

However, this deposit is non-refundable for those filing for their own bankruptcy. Creditors may recover the deposit if sufficient funds are available in the bankrupt’s estate.

Some cases may qualify for the Debt Repayment Scheme (DRS), an alternative to bankruptcy designed to help debtors repay their debts without filing for insolvency.

The DRS is accessible only through creditors and is available to employed individuals with debts of up to S$150,000 (US$114,807).

Those who qualify must repay their debts in monthly installments over up to five years.

Credit Counselling Singapore (CCS) general manager Tan Huey Min noted that borrowers under the DRS typically repay less than the full amount owed, but once they fulfill their obligations, they can start afresh.

MinLaw cautioned, however, that there is no guarantee of significant debt reduction, and any reduction above 70% would be considered substantial.

Despite the lighter debt burden under the DRS, some individuals still fail to complete their repayment plans.

In such cases, creditors can pursue the remaining debt, which may include filing another bankruptcy application.

Additionally, not all debtors qualify for the DRS, and those deemed unsuitable are declared bankrupt.

Recent reforms in Singapore’s bankruptcy system aim to rehabilitate debtors with clearer discharge timelines

In an interview with Straits Times, Yuen Law associate director Tris Xavier highlighted that prior to 2016, the system lacked clear timelines for discharge from bankruptcy, with some individuals remaining in this state for decades.

The reforms now offer clearer milestones for debtors based on their personal circumstances, making the system more debtor-centric.

First-time bankrupts can be discharged within three to seven years if they meet their target contributions, which typically require 52 monthly payments.

Repeat bankrupts can be discharged within five to nine years, contingent on 76 monthly payments.

Those who fully meet their target contributions will have their names removed from public records five years after discharge, while those who do not will remain on public records permanently.

Xavier emphasized that bankruptcy should not be seen as a way to reduce debt but rather as a financial rehabilitation tool.

He warned against hiding assets, explaining that bankruptcy laws cover both local and overseas assets, and the court can reverse transactions intended to shield assets from creditors.

While CPF savings are protected from creditors during bankruptcy, CPF funds inherited by a bankrupt after death are not.

Additionally, bankrupts face restrictions, including needing permission to travel overseas and being barred from managing a business or acting as a company director.

For those in financial distress, bankruptcy is not the only option.

Xavier advised debtors to communicate openly with creditors as soon as financial difficulties arise.

Credit Counselling Singapore (CCS) also offers a Debt Management Programme that negotiates more affordable repayment terms with creditors.

Unlike the DRS, the CCS program requires full repayment of debts, but it allows individuals to avoid bankruptcy, keeping their financial situation private.

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