Facebook gets initial approval to set up local unit in Indonesia - source


By John Chalmers and Eveline Danubrata
    JAKARTA, June 19 (Reuters) - Facebook Inc <FB.O> has
received an in-principle 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 <GOOGL.O> 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.
    In fact, Google has been locked in a months-long dispute
over allegations by Indonesia's government that the search giant
had not made enough annual payments. The outcome of this is
expected to indicate how the government may pursue others such
as Facebook and Twitter Inc <TWTR.N> for taxes.
    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 as of
the 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. (http://bit.ly/1nRZJ0x)

    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 programme.
Other governments around the world are also seeking to clamp
down on what they see as corporate tax avoidance.
    Last week, the communications minister said Google'sAsia
Pacific headquarters had agreed on future tax payments in
Indonesia. But he declined to comment on whether they had
resolved their dispute over taxes for past years.[nL3N1JB4IQ]
    It was also unclear if Google would set up a domestic unit
that is separate from its existing local entity, PT Google
Indonesia, which tax officials allege simply acts as a sales
service provider.
    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.
    However, Google has pointed to a joint study by the firm and
Singapore state investor Temasek that estimated the size of
Indonesia's digital advertising market at $300 million for 2015.

 (Reporting by John Chalmers and Eveline Danubrata, additional
reporting by Cindy Silviana, Hidayat Setiaji and Jakarta
Newsroom; Editing by Himani Sarkar)
 ((eveline.danubrata@thomsonreuters.com; +62-21-29927603;
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This article appears in: Stocks , World Markets , Politics
Referenced Symbols: FB , GOOGL , TWTR

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