Muhammad Hanif, head of the specials cases branch in the tax office, says Google's refusal to cooperate after it was sent a letter in April requesting to be allowed to examine the company's tax reports has raised suspicions.
"We will elevate this to an investigation because they refused to be examined, and this is definitely an indication of criminal activity," Hanif told a news conference.
He added that the probe would not be launched until the end of the month at the earliest.
Taj Meadows, head of policy communication for Google in Asia Pacific, declined to comment immediately on the issue.
The government had also asked to examine the tax reports of the Indonesian offices of three other US Internet based companies - Yahoo, Twitter and Facebook .
Those three companies have complied, officials said.
Yahoo and Google have formed Indonesian limited liability companies, while Twitter and Facebook operate branches of their Asia-Pacific offices in Indonesia.
The government believes these companies owe income and value added tax on billions of dollars of revenue they generate from advertising in Indonesia, the tax office said.
