Tue, 25 Mar 2008
From: The Jakarta Post
By Aditya Suharmoko, The Jakarta Post
The cash-strapped government plans to broaden categories of goods subject to excise duty in response to an expanding state budget deficit and an intense campaign to reduce environmental hazards.

A proposal to expand the list of goods subject to excise is under discussion in the House of Representatives. The duty is currently applied to tobacco, alcohol and ethanol derivatives.

"Rubber tires and soft drinks are among the 41 items proposed by the government for the new excise list," Andi Rahmat, a member of the House's commission XI for financial affairs, said Monday.

Under the excise law, the government is allowed to propose goods for excise duty if the goods can potentially harm health or the environment.

Late Monday, commission XI summoned business associations from the tire and soft drink industries to discuss the potential impact of the excise.

According to Andi, the proposed list of dutiable items includes wood, cement, oil-based fuels and products and services from amusement centers.

He said the proposed list was similar to those set out in neighboring countries such as Malaysia and Thailand.

"In Thailand, for example, soft drink producers are subject to excise duty because the packaging is not recyclable, potentially harming the environment," he said.

The new list was aimed at helping the government raise more revenue as well as reducing environmental hazards, Andi said.

However, he said, the House still needed to consider carefully which items could be included in the new list to avoid undermining any industries or triggering price increases.

"For example, if we slap an excise on cement, property prices will increase. This will in turn hurt consumers," he said.

Under the excise law, excise duty is set at a maximum of 1,150 percent of the factory price, or up to 80 percent of the sale price.

The Finance Ministry's head of fiscal policy, Anggito Abimanyu, said he was not aware of the plan.



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