Carmakers welcome new tax plan

Novan Iman Santosa, The Jakarta Post, Jakarta

Indonesian automakers mostly gave a positive response on Thursday to the government's plan to review the current method of determining the luxury tax on cars, saying it would be fairer and beneficial to customers, but reminded the government to be very careful in implementing the tax change.

Minister of Industry and Trade Rini Soewandi said on Wednesday that the tax formula would be changed from one based on engine displacement to one based on a car's value, to increase fairness.

"The current luxury tax is based on engine displacement and quite unfair to customers. We expect to apply the new tax system next year," she said.

"Customers often have to pay a higher price just because the car they are buying has a higher engine displacement, although price wise, it's cheaper," she added.

Rini gave the example of a multipurpose vehicle (MPV), which usually come with a higher engine displacement but have a lower price than other cars with a lower engine displacement.

It is still unclear, however, how to define a car's value.

"How do we calculate a car's value? Its wholesale price or its retail price?" asked senior managing director of Toyota Motor Company, Akio Toyoda.

"If the tax is based on a car's retail price, it will be affected by price fluctuations, further impacting on the tax system," he added.

Chief executive officer of PT Auto Euro Indonesia, which handles French car Renault, Christian Iskandar, agreed that the government should be careful.

"However, such a change is a good thing, and would advantage customers," he said.

"We must also remember that the government is trying to increase its tax revenue."

Marketing director of Korean car manufacturer PT KIA Motors Indonesia Suwanda Setiadi said price fluctuation was not such a big problem, as it had been calculated beforehand and would be generally stable.

"I don't think there will be any volatile price fluctuation, except for force majeure, such as we suffered during the crisis in late 1990s," he said.

"It would be better if we calculated the car's price based on its off-road condition, or just after being finished at the factory," he added.

Marketing director of TMC's subsidiary in Indonesia, PT Toyota-Astra Motor, Keiichi Murakami asserted that the company would work together with the government if the latter decided to formulate the luxury tax based on a car's value.

"We will also hold intensive discussions with the Association of Indonesian Automotive Manufacturers (Gaikindo)," he said.