Facebook Inc has received an approval to set up a domestic unit in Indonesia, said a senior government source from the Southeast Asian nation, home to the social networking giant’s fourth-largest user base.
Indonesia has been pushing multinational technology firms to be locally incorporated, arguing that companies such as Alphabet Inc’s Google set up small business entities to provide “auxiliary” services and get away with minimal taxation, while booking most of their revenue from the country elsewhere.
Facebook is now in the process of establishing a local unit in the country, said the senior government source, who has direct knowledge of the matter but declined to be identified as the information was not public. The social media giant currently operates in Indonesia through an office in central Jakarta.
Indonesia had 69 million monthly active Facebook users
First quarter of 2014, placing the country fourth globally after the United States, India and Brazil, according to data from the company.
Facebook did not respond to requests for comment and has not provided an update on the number of its users in Indonesia.
The office that Facebook opened in Indonesia three years ago allows it to work with advertisers as well as small and medium businesses “that need an education on how to market their products”, a Facebook executive told local media at the time.
But according to an official at Indonesia’s communications ministry, “Facebook only appoints people in Jakarta when the need arises, no more than that. Whether they have a permanent office here or not, we don’t even know.” Indonesia is eager to ramp up tax collection to narrow its budget deficit and fund an ambitious infrastructure program. Other governments around the world are also seeking to clamp down on what they see as corporate tax avoidance.
Indonesia’s tax office estimates the total advertising revenue for the industry in the country at around $830 million, with Google and Facebook accounting for around 70 percent.