Electronics producers renew call for tax review following Sony decision
Electronics producers renew call for tax review following Sony decision
The Jakarta Post, Jakarta
Electronics manufacturers renewed calls on Thursday for the
government to review its tax policy on electronics and to boost
its antismuggling efforts to help locally made goods compete in
the local market.
The call comes in the wake of the bombshell announcement by
Japanese electronics giant Sony Corp. that it is relocating its
audio plant to Malaysia.
Lee Kang Hyun, chairman of the Association of Indonesian
Electronics Producers, said multinational companies such as Sony
were primarily interested in Indonesia's huge potential market.
By opening manufacturing plants in Indonesia, they hope to
produce cheaper electronics products given the closeness to the
market.
However, they are having to compete with cheaper products
illegally smuggled into the country, he said.
Furthermore, he said, the government's tax policy has curbed
the growth of electronics producers.
He said that in order to grow, electronics manufacturers had
to continue making new and ever-more sophisticated products, such
as today's digital products.
But electronics producers in Indonesia are reluctant to do so
given the tax policy here, which obliges them to establish a new
business entity anytime they want to produce a new item.
This policy prevents producers from using their profits to
cover the production costs of the new product, which cuts into
the government's tax revenue.
"Electronics companies in Indonesia must continue producing
new items. Otherwise they will be crushed by the competition. But
the tax policy discourages them from doing so," Lee, who is also
general manager of PT Samsung Indonesia, said on the sidelines of
ceremony to introduce four new Samsung mobile phones.
At present, Lee added, all of the different taxes levied on
electronic goods reach 52.5 percent.
Lee said the government should cut the luxury tax and value
added tax (VAT) on electronics goods to below 10 percent and 5
percent respectively.
Lower taxes, Lee said, are the key to preventing smuggling as
this would enable local producers to cut their prices to compete
with smuggled products.
The director general of taxation at the Ministry of Finance,
Hadi Purnomo, claimed that the tax policy in Indonesia was more
competitive than in many other countries.
"I think our tax policy is competitive compared to other
countries, either in terms of rate or incentive facilities for
foreign investors," Hadi said as quoted by Antara.
Explaining the incentives for foreign investors, Hadi said
the dividend tax payable by foreign investors is cut from 20
percent to 10 percent if the investors suffer losses in their
first and second years.
The investors also receive certain benefits from the
government, Hadi said without going into detail.
Thus far, Sony has remained silent about its reasons for
relocating its plant, leaving the government and businesspeople
pointing their fingers at each other.
However, Lee said, Sony's decision might not have been based
solely on problems within Indonesia's electronics industry.
Global competition, which is getting tighter, has forced the
electronics giant to reconsolidate in order to survive, he said.
Meanwhile, the relocation of the plant will just add to the
country's unemployment woes, with another 1,000 jobs lost.
Minister of Manpower and Transmigration Jacob Nuwa Wea,
claiming the government had yet to receive an official
explanation from Sony about the planned closure, said his office
would summon the management of PT Sony Electronic Indonesia to
explain their decision.
Jacob also met with representatives of Sony's labor union
earlier on Thursday.
"I asked the union to seek clarification from the management.
If necessary they should ask for an explanation directly from
Japan," Jacob said.