Struggling to Tax
The world is entering a new phase in the struggle for a fairer global economic system.
Widening inequality, the climate crisis and rampant cross-border tax avoidance have driven the creation of the United Nations Framework Convention on International Tax Cooperation. The initiative has entered formal intergovernmental negotiations under the Intergovernmental Negotiating Committee (INC), following the adoption of its terms of reference in December 2024.
Such development is a golden opportunity for Indonesia to ramp up its state revenue, especially in optimising the tax contribution from the big techs, which has remained low, as reflected in Indonesia’s low Digital Tax Coefficient.
To paint a picture, nine digital giants have been able to reap staggering economic benefits in Indonesia while facing disproportionately low tax.
Annually, the combined revenue of these giants reached Rp590t (US$34.8b) while their combined profit reached Rp150t (US$8.9b). It is the time for the government of Indonesia to take the decisive step: to become the vanguard and spearhead this negotiation together with ASEAN, Asian countries and in particular the Global South.
Taxing Big Digital Companies
Being the fourth most populous country on earth, Indonesia’s digital economy potential cannot be understated. Indonesia’s digital economy has continued to expand rapidly, driven by increasing internet and mobile phone usage.
The statistics from the 2024 National Socio-Economic Survey indicated that internet penetration had increased from 71.8% in 2021 to 79.1% in 2024. The average monthly spending on internet access also reached Rp211,000.
The e-Conomy SEA 2025 report also showed that Indonesia’s digital economy was expected to hit US$100b in Gross Merchandise Value (GMV) by 2025, growing at a rate of 14% year-on-year, driven by video commerce, digital financial services, digital media and AI.
These statistics strongly suggest that Indonesia’s digital economy has experienced robust growth and is likely to continue with such trends in the future. These trends clearly indicate that digital value creation in Indonesia is significant.
Meanwhile, the Center of Economic and Law Studies’ (CELIOS) 2025 report, Respectfully, Public Officials: Taxation Should Not Be Like Hunting in a Zoo, identified that companies such as Alphabet, Meta, Microsoft, Apple, ByteDance, Netflix, Sea Group, Spotify and Samsung had collectively earned around Rp590t (US$34.8b) in revenue and Rp150t (US$8.9b) in profit in Indonesia in 2024.
Unfortunately, all these positive notes were not followed by tax revenues that were proportional to the real value creation stemming from real economic activity in the digital sector.
Statistics from CELIOS’ Digital Economy Outlook 2025 showed that in 2024, Indonesia had generated a digital gross merchandise value (GMV) of Rp 1,350t (US$79.7b), while digital tax revenue had amounted to only Rp32.32t (US$1.9b).
By comparison, total national tax revenue reached Rp1,932.4t (US$114b) while GDP stood at Rp22,139t (US$130.7b). This resulted in a Digital Tax Coefficient of only 0.27, meaning that for every unit of digital economic contribution to GDP, only 0.27 units are converted into tax revenue, far below the average of other economic sectors.
Golden Opportunity
Negotiations under the INC are scheduled to run from 2025 to 2027. In 2024, three major meetings in New York and Nairobi produced important commitments, including those related to the taxation of cross-border services.
These protocols are crucial in addressing the failure of the existing international tax rules in the face of globalisation and digitalisation. Currently, taxing rights are still largely tied to the physical presence of the company in a country rather than its business activities. Thus, governments have limited ability to collect tax from digital services delivered from across the border.
The delegates had pushed for the recognition of market location and value creation as key criteria for determining taxing rights, to ensure that the countries where users and consumers are located are entitled to the tax from the big techs that are doing their business there.
One of the most important decisions that came from the UN Tax Convention forum is its commitment to fairer cross-border taxations, which includes digital tax for multinational companies. Together with the commitment for beneficial ownership data and country-by-country reporting, these measures represent an important step in preventing cross-border tax avoidance and tax evasion, as well as illicit financing.
According to the Tax Justice Network, Indonesia lost approximately US$2.8b (Rp47.1t) annually to tax havens in 2024, plus another US$602m (Rp10.1t) to other countries—amounting to Rp57.2t (US$3.4b) in total annual losses.
Global tax abuse cases are not a recent occurrence. Apple was ruled by the European Commission to owe €13b in unpaid taxes to Ireland due to illegal tax arrangements that allowed it to pay less than 1% tax on massive global profits.
Indonesia has faced similar cases. Google allegedly owed Rp5t (US$295m) in unpaid taxes in 2015, according to Indonesia’s Directorate General of Taxes.
Beyond preventing revenue leakage that has recently been a major focus of the Indonesian government, particularly the Ministry of Finance, progressive protocols under the UN Tax Convention could help Indonesia improve its stagnating tax-to-GDP ratio, which remains around 10%.
By adopting taxation based on significant or real economic presence, Indonesia could impose revenue-based digital taxes on multinational tech firms. CELIOS estimates that a 5% digital withholding tax on the nine major digital corporations could generate up to Rp29.5t (US$1.7b) annually in additional revenue.
Davos: Tax the Super Rich?
Before this year’s World Economic Forum was conducted, nearly 400 millionaires and billionaires from 24 countries issued a public call to world leaders to “… tax us. Tax the super rich!”
This was the result of an inflated perspective about how oligarchs around the world, with their concentration of wealth, might buy influence in the political arena.
So far, Indonesia’s delegation in the UN Tax Convention has taken an active stance in supporting the interests of developing countries. The UN Tax Convention Policy Tracker, which was initiated by the Tax Justice Network, considers Indonesia as one of the leading countries due to its proactive engagement in every UN forum concerning this issue.
Indonesia has been continuously supporting the effort to recognise the taxation rights of the developing countries as well as supporting stronger source-based taxing rights, international cooperation that respects fiscal sovereignty and transparency through information exchange.
However, Indonesia has yet to demonstrate political willingness in openly and explicitly advocating for wealth taxes for High Net-Worth Individuals (HNWIs). This is striking, given that in the digital economy, two of Indonesia’s 10 richest individuals derive their wealth from technology-related sectors.
Structural and deepening inequality has not yet shifted Indonesia’s cautious diplomatic posture into substantive leadership. When the wealth of the top 50 Indonesians equals that of 50 million citizens, the absence of wealth taxation reflects a failure to confront an urgent social crisis. Indonesia may be labelled a leader, but leadership without courage only preserves the status quo.
The UN Tax Convention must become a turning point. Indonesia should step forward to lead regional and Global South consolidation efforts by building common negotiating positions across ASEAN and Asia, strengthening coalitions of negotiators, sharing tax data and policy research, and jointly advocating for significant economic presence, mandatory global information exchange, and wealth taxation.
Without coordinated strategies and clear collective demands, Indonesia’s leadership risks remaining mere diplomatic rhetoric rather than driving structural change in the global tax regime at a time when inequality, digital monopolies and climate financing gaps dominate the global agenda, including at Davos 2026.
