Finance ministry approves land transportation subsidy

Urip Hudiono The Jakarta Post/Jakarta

The Ministry of Finance has approved a land transportation subsidy in the form of fiscal incentives on import duties and taxes.

With these incentives, the government expects land transportation operators to be able to slash their operational costs by 5 percent and avoid having to raise their fares by more than 10 percent to offset the impact of the recent fuel price hike.

The finance ministry's director general of customs and excise, Eddy Abdurrachman, said on Wednesday reduced import duties would be imposed on completely built-up (CBU) buses, bus chassis and spare parts for buses that local manufacturers cannot produce, such as clutches and engine cylinders.

"The import duty reductions will vary from item to item, but the import duty on several of the items will be scrapped entirely," Eddy said following a meeting between officials of the finance ministry, the Ministry of Transportation and the Ministry of Industry.

"Chassis, for example, will have zero import duty."

The import duty on CBU buses was previously 40 percent, while import tariffs for spare parts ranged between 10 percent and 15 percent.

Eddy refused to provide more details on the fiscal incentives, including those for taxi and train operators. He said Minister of Industry Andung A. Nitimihardja soon would address the issue in greater detail.

He said he would carefully consider the impact of the reduced import duties on the revenue of the customs office.

"This is of concern, especially considering that many others have asked for import duty incentives," he said.

The government has targeted Rp 12 trillion (US$1.28 billion) in revenue from customs, Rp 28.9 trillion from excise and Rp 271 trillion from taxes this year.

Meanwhile, the head of the finance ministry's fiscal policy division, Anggito Abimanyu, said the ministry would also consider providing other forms of fiscal incentives to land transportation operators.

"We are considering providing tax incentives as well, but reducing import duties will be the main incentive," he said, adding that the fiscal incentives would likely affect the revenue and expenditures in this year's state budget.

The government cut the fuel subsidy and increased domestic fuel prices by an average of 29 percent starting March 1. It made the move to reduce the burden placed on the state budget by the massive fuel subsidy, encourage more efficient fuel use and prevent fuel smuggling.

Following the fuel price hike, land transportation operators raised their fares, despite a promise from Minister of Transportation Hatta Radjasa that the government would provide them with fiscal incentives.

The government has said it will divert more funds into public transportation in a bid to cut down extortion and other illegal fees -- which account for about 40 percent of the operating costs of public transportation owners. The government said it also would order local administrations to reduce the fees for registering vehicles, renting space at bus terminals and for vehicle inspections.