Indonesia starts shakeup of tax payments with Google agreement

Alphabet headquarters Inc’s has Google agreed on Asia future Pacifictax payments in Indonesia, the communications minister said, paving the way for a shakeup in how technology companies operate in Southeast Asia’s biggest economy, Reuters reported Thurs-day Google has been locked in a monthslong dispute over allegations by Indonesia’s government that the company had underpaid taxes.

Finance Minister Sri Mulyani Indrawati said on Tuesday that Indonesia had reached a deal with Google for 2016. She declined to disclose the settlement sum.

The dispute was seen as a bellwether of how Indonesia might pursue other technology companies such as Facebook Inc and Twitter Inc for taxes.

“On the solution for future taxes, they ( Google Asia Pacific) have agreed with the government,” said Minister of Communications and Information Rudiantara.

This may be subject to a change in Indonesia’s regulation for the advertising business, which has been proposed by the communications ministry, said Rudiantara.

The ministry will work with Indonesia’s investment coordinating board on the regulation, he added.

Rudiantara declined to comment on whether Google had reached an agreement with Indonesia on its taxes for previous years.

Indonesian tax officials have alleged that most of Google’s revenue generated in the country is booked at its AsiaPacific headquarters in Singapore and its local entity, PT Google Indonesia, simply acts as a sales service provider.

Under a new agreement, Google’s Indonesian entity will receive the revenue and pay expenses for its business in the country, said a senior government source, who declined to be identified as the information was not public.

It is unclear if Google will set up a new domestic unit that is separate from PT Google Indonesia. Google did not respond to requests for comment.