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)