Government scraps VATs to help shipping industry

JOHOR BAHRU, Malaysia (JP): The government took steps to help the country's ailing shipping industry by lifting all value added taxes (VATs) on the purchase and lease of ships, docking and port services.

The director general for sea transportation at the Ministry of Communications, Agus Rudyanto Ruwadi, said here on Saturday that President B.J. Habibie issued a decree on Thursday eliminating these 10 percent VATs.

"The measure is part of the government's commitment to develop the country's shipping industry and prepare it for global competition," Agus said on the sidelines of the ceremony marking the delivery of crude oil and gas tankers from Malaysia Shipyard & Engineering Sdn Bhd to PT Bumi International Tankers and PT Layar Sentosa Shipping Corporation in Pasir Gudang, Johor Bahru, Malaysia.

Local shipping companies have long complained about the high taxes imposed on them by the government, blaming these taxes for helping to cripple the development of the country's shipping industry.

Secretary General of the Indonesian National Shipowners Association Barens Saragih, also present at the ceremony, said the association warmly welcomed the government's move.

"We really thank the government for realizing the importance of increasing the competitiveness of the national shipping industry," Barens said, adding countries such as Malaysia and Singapore had long since removed value added taxes on their shipping companies to help make them competitive.

Barens, however, called on the government to further deregulate the country's shipping industry by scrapping the remaining 1.2 percent corporate taxes as had been done by Singapore and Malaysia.

"The shipping industry is part of the infrastructure. The taxes imposed on it will multiply the prices of the commodities it carries," Barens said.

He said that in the past the association had repeatedly called on the government to take measures to strengthen the country's shipping companies, arguing that the country could save more of its foreign exchange earnings if national shipping companies carried a larger portion of the country's exports.

However, the government under former president Soeharto paid little attention to the shipping industry, focusing instead on export-oriented companies.

Today, Barens said, national shipping companies transport only 3 percent of the country's exports, leaving the remaining 97 percent to be carried by foreign shipping companies.

Because of this, the country must spend billions of dollars per year for the transportation of its goods.

Barens, however, said he was optimistic that national shipping companies would be able to increase the percentage of the country's exports that they transport, "provided that the government is consistent with its deregulation policies". (jsk)