Car import tariff, tax revised

Car import tariff, tax revised

JAKARTA (JP): The government on Thursday restructured taxes
and import tariffs on automobiles, claiming the changes could
lower the showroom prices of small sedans by 9.8 percent and
small pickups by 7.5 percent.

However, prices of minivans, which account for more than 80
percent of total car sales, are estimated to decline by a mere
1.2 percent, while those of luxury cars with engine capacities of
more than 1,500 cubic centimeters will increase.

However, Minister of Industry and Trade Rahardi Ramelan, who
announced the new policy, said the impact of the new tax and
import tariff structures would depend on market competition, the
supply-demand equation and pricing policies of assemblers.

"The new policy abolishes tax and tariff incentives linked
with the level of local content to comply with the rules of the
World Trade Organization," Rahardi said.

Rahardi said import tariffs on completely-built-up (CBU)
sedans were cut to between 65 percent and 80 percent depending on
the size of the engine, from 200 percent previously.

Import tariffs on CBU jeeps and minibuses were lowered to 45
percent from 105 percent, while those for commercial vehicles
ranged from five percent to 40 percent depending on their gross
weight.

The changes are effective immediately.

"This new automotive policy is designed to make cars more
affordable to consumers, to safeguard investments already made in
the domestic car industry and to build a competitive automobile
industry," the minister said.

The new policy set import tariffs at a maximum of 15 percent
for all car components, and between 35 percent and 50 percent for
sedans imported in complete-knocked-down form for local assembly.

The import tariff for trucks was set at 7.5 percent and for
incomplete vehicles at 15 percent.

Rahardi said that to offset the potential decrease in
government revenues from the lower tariffs, the government raised
luxury sales taxes on most cars.

Luxury taxes on sedans were raised to between 30 percent and
50 percent, from 20 percent and 35 percent previously, while
those on minivans vans were narrowed to 10 percent and 30 percent
from zero to 35 percent

Buses, which were previously exempt from luxury taxes, are now
subject to a 10 percent tax, but trucks, and motorcycles with
engines smaller that 250 cubic centimeters, remain exempt from
luxury taxes.

The Ministry of Finance's Director General of Taxation,
Anshari Ritonga, who also attended the news conference, said the
cut in import duties would lower government revenue by an
estimated Rp 64 billion in the current fiscal year.

Rahardi added that the new policy was taken ahead of the Jan.
1, 2000, deadline, imposed on Indonesia last year by the WTO, for
abolishing tax and tariff incentives linked to the use of local
components.

The government implemented last July, ahead of schedule, the
ruling of the WTO Dispute Settlement Body requiring Indonesia to
abolish special taxes, tariffs and credit privileges to the Timor
national car program owned by former president Soeharto's son
Hutomo Mandala Putra.

"This new policy will initially affect some inefficient
automobile and component manufactures, but in the medium to long-
term, it will definitely be beneficial to the industry and help
local car companies become more competitive," he said.

Rahardi denied that the delays in the launching of the new
policy were due to lobbying by several big auto makers that had
invested heavily in the manufacture of car components.

But he conceded that the fate of big investments in the
industry had been thoroughly considered in the formulation of the
new tax and tariff policy.

Meanwhile, the chairman of the Association of Indonesian
Automotive Industries (Gaikindo), Bambang Trisulo, welcome the
new measure, hailing it as "a bitter pill which will save the
life of a dying patient".

"Let's face it, we have no choice. Sooner or later we will
have to enter the free trade era. Although it may hurt the
automotive industry, we need it to provide a strong base for our
automotive industry to grow," Bambang said. (gis)