Despite the enormous market potential in Indonesia, doing business, particularly when dealing with taxation issues, can be a huge challenge.
Home to more than 250 million people, Indonesia has only 30 million registered taxpayers of the 93.7 million working citizens, according to data from the country’s Central Statistics Agency (BPS). Of that number, only about 63 per cent pay their taxes and report their incomes.
Having experienced the taxation pain point himself, French entrepreneur Charles Guinot, who has been residing in Indonesia for the past five years, decided to launch OnlinePajak, a platform aimed to remove corporate administrative hassles for taxpayers. OnlinePajak is now an approved official tax app service provider by the finance ministry.
In an interaction with DEALSTREETASIA, Guinot reveals about the startup’s ambitions, future launches, fundraising plans, and how it intends to reform the tax system in the country.
How did the idea of starting OnlinePajak come about?
I have been living in Indonesia for the past few years, and since then have been trying to start a company related to export and import of mechanical components. When we started, I was alone, and I felt the tax system in the country was very painful. The company grew, I had more staff coming, and at one point, we had a tax consultant and an accountant, but still, the tax paying process was painful. Every time we were late, we would pay the penalties, and so on.
So I thought we could do better. I went to the tax agency office asking (them) if they had a tax software and, if maybe, I could purchase it. First, they introduced me to e-filing, which was created in 2003. Then they told me to use a local tax software called e-SPT. But it was still not good enough. I said how about we do something better? I said I wanted to develop a system, let’s work together.
We asked around and everybody had the same pain point. It took us three years until we launched. We spent a year and a half to get the licence, then we spent almost a year on the coding part of the tax agency’s system so we could really connect our service to theirs, plus the audit and so on, it took us two years. Finally, we launched OnlinePajak in July 2015.
What sort of services did you initially offer?
Our vision was to have one central application online where you hitung (prepare), setor (pay), lapor (file). So, prepare, pay, file. At the beginning, in July 2015, we launched the ‘file’ feature, a year later the ‘pay’ feature, and then later on the ‘prepare’ feature. It’s meant to be an alternative to the existing government software e-SPT. If you use e-SPT, you still have to use different apps for different types of taxes. But we put everything in one place, in one application.
Could you share with us some user statistics?
Right now, we have 200,000 users with 90,000 of them being companies. In terms of tax collection, last year, we did Rp2.7 trillion. This year we are hoping to record Rp 15 trillion in tax collection. Tp date this year, we already have Rp 1 trillion, so I am very confident that we will reach the target. You see 2016 was not a full year for us. We launched July 2015 and took some months to process, then 2016, we launched the e-billing and again we took six months to process. This year we are 100 per cent operational, so we can really go. I’m confident we will reach the target. Hopefully more.
What is the profile of your users? Who are your biggest clients?
The biggest would be Telkomsel definitely. Then Kawan Lama Group, Astra, TNT, Cocola, Huawei, Go-Jek, and Tokopedia.
In this space, you are looking at four different kinds of potential customers: first is the individual data employees. In this group, there are 35 million NPWP holders, but only 900,000 individuals pay taxes annually, simply because most people have their taxes already covered by the companies they work for. So it’s not exactly our focus, they only need to report once a year and it is not that painful.
Then, you have the entrepreneurs. These are the people that have their own companies or businesses, including those who sell things on Instagram. This group is very interesting and we are working on this one. We work with the ministry of communication for the e-commerce platform to target this group. In fact, when we started, we were actually targeting businesses in this scale (10-15 employees). But of course as the company develops we are happy that we can also attract Telkomsel and all these big clients to join the system despite not expecting to have them. We are happy that our services fit these companies as well.
How do you monetise the services?
When we launched this app, it was very clear to us that we didn’t want to charge mon- ey from the taxpayers. It was already so painful to pay taxes, if you have to pay again to do that then you have a problem. These are our values and I don’t want to compromise that.
However, we can do a lot of other things to make money. Right now our model is freemium, where you can prepare, pay, and file your taxes for free, but one will be charged for more sophisticated features like generating invoices, payment slips, integration with company’s accounting, human resource department, and other tax solutions. In other words, you have the free version which is the basics for tax to integrate with more advanced features.
How are you funded? And is there any plan to raise funding?
We are completely self-funded. Privately and independently funded. I think this is one of the reasons that the ministry of finance works with us: because we are not affiliated or backed by any company. This is what’s important when you are building a tax system for the nation. You should be able to work with everybody.
We might want to raise, but if we were to do it it would have to be with very independent parties because that is key for us. We are always open.
If you were raising, what kind of investors you would be approaching?
I would be approaching investors who are real professional venture capitalists. The only thing we are lacking is professionals who are used to dealing with startups that can force us to have the right key metrics. These guys would bring value to us. But again, it needs to be VCs that are not linked to anyone.
I think that is the issue with most VCs and most investor consortiums here in Indonesia. There’s always someone involved in politics.
Do you have plans to expand to other countries?
I would love to. Tax burden is everywhere, not just in Indonesia, even in developed countries like France. In Philippines they have the same problem as they have a similar tax model. So if we can do something in the Philippines we will be happy. I hope we can do it in the next two years. For now, we’ll focus on doing well in Indonesia. After that for sure (we will expand), if we can. It doesn’t make sense to have multiple systems for tax, especially because the basics will always be the same. So yes, we can apply our system in multiple countries.
Any new features that you are planning to launch this year?
We are launching a new feature called PPH final. This is one of the major things we will launch, targeting smaller companies. These smaller companies currently don’t even want to bother to take care of their taxes. So this feature will be specifically designed to help them.
How do you think OnlinePajak can impact the business ecosystem, and eventually, the Indonesian economy in general?
On top of just simplifying taxes for startups, we are hoping to educate the masses that online transaction is safe and worth trying as an alternative to SaaS. Customers – digital startups or not – need to be educated on the benefits of the online process. If you can sort out all your taxes in one click, you can start focusing on the real work.
When this happens then we can help the country collect more taxes, which hopefully will mean more roads, more hospitals, more education. At least it’s supposed to mean that. We are also boosting the productivity of Indonesian companies because they would spend less time on administrative tasks, and spend more time on the real business. The effects will be exponential.
Do you think there should be more startup-government collaborations for more effi- cient administration?
Absolutely. I have one advice to the government. They should really we come that (partnerships with startups) because startups can really do everything. Pro-curement processes inside the government are typically super long, the decision pro-cesses are complex, corruption is rampant. Startups can help solve these things because our focus is just all about delivery.
In France, they do this all the time. They create startups for everything whose functions are just to deliver (services to the people). Let it be disrupted by technology. I’m sure it would serve the citizens better.
And if I may give an advice for the startups, just be patient. Be patient and make sure you have something good in your proposal that really brings something to the table for the government and for the people.
How much are you valued right now?
We have no valuation yet as we haven’t talked to investors at all.