Indonesian Ministry of Industry Proposes the Reduction of Import and Luxury Taxes for Sedans

(Retrieved from Kontan Harian)

The Ministry of Industry is looking to revise the structure of automotive taxes. One of the main points include the reduction of import taxes (bea masuk) and luxury taxes for sedans.

Minister of Industry, Airlangga Hartanto, mentioned that the reduction of import and luxury taxes is to increase the basis for exportation of the vehicle segment.

At this time, the proposal is with the Ministry of Finance. “We (Ministry of Industry) have provided the proposal to the Ministry of Finance, in hopes that the sedans will no longer be considered as luxury goods,” said Mr. Hartanto on Thursday (Feb 2)

He added, now is the right time to utilize the momentum that will grow the sedan industry inside our country as Australia has shut down all their automotive production facilities. It has been noted that the Australian sedan market is fairly large, reaching two million units sold.

In addition, both countries are pursuing for the Indonesia-Australia Comprehensive Partnership Agreement (IA-CEPA). Should the trade agreement pass, along with the reduction of taxes for sedans, this will ease Indonesia’s interests in exporting automobiles.

Mr. Hartanto admits that they are still calculating the exact formula to reduce the luxury tax, however it is certain that it will be lump-sum based as opposed to a percentage.

With this tax revision, Mr. Hartanto is optimistic that the domestic Indonesian automotive production would increase to two million units a year. According to the Ministry of Industry’s calculations, the production utility of the automotive sector in Indonesia is producing 1.4 million to 1.5 million units a year.

The response from the automotive brands have been positive. Kariyanto Hardjosoemarto, Deputy Director of Sales Operations and Product at PT. Mercedes Benz Distribution Indonesia mentioned that the tax cut will help grow the market for sedans. On a price point basis, it will be more competitive.

Meanwhile, Jonfis Fandy, Director of Marketing and Aftersales Service at PT. Honda Prospect Motor mentioned that there was no distinct reason to have introduced a higher tax for sedans in comparison to other vehicle types.
“In our opinion, sedans should be considered as luxury vehicles if they are 3,000 cc above,” said Jonfis.

However, the market response to the tax reduction would not be felt immediately. In fact, it will need time for the effect to be felt. “There are not many variety of sedans right now. Only medium to large or luxury sedans are the most in the market,” said Jonfis.

President of Gaikindo, a collective group of automotive brands in Indonesia, Jongkie Sugiarto mentioned the taxation on sedans, currently at 30%, is too heavy for the automotive industry to penetrate the export market. Especially the fact that the largest demand for automobile types are sedans all around the world.

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