Government to crack down on electronics smuggling

JAKARTA (JP): The government will crack down on electronics smuggling which has adversely affected the local industry, said Minister of Industry and Trade Rahardi Ramelan on Thursday.

Rahardi told a seminar the government was studying five measures to combat smuggling, including plans to collect value- added tax and luxury sales tax at distribution points and to restructure the luxury sales tax on electronic goods.

He said the government also would subject electronic goods to the Indonesian Industrial Standard and would step up market operations against smuggled goods.

Rahardi said smuggling not only hurt the local industry but also caused big losses in state revenues because smuggled goods did not pay taxes and import duties.

"Smuggling of electronic goods has severely damaged our local industries. At several major electronic goods centers in Jakarta, the ratio between smuggled goods and local products is often as high as two to one," he said.

Chairman of the Indonesian Electronics Association, Rachmat Gobel, disclosed at the seminar that estimated on the volume of smuggled electronics such as televisions, air conditioners, fans, gas cookers and refrigerators during the first five months alone, the government might lose a total of US$86 million in tax and duty revenues for the whole year.

Director General of Taxation Anshari Ritonga told the same meeting that the government would redefine the category of luxury goods in light of restructuring luxury sales taxes.

Gobel fully supported Ritonga's statement, arguing that goods widely used by the general public were often classified as luxury items.

For example, 14-inch televisions and electric irons, which hold 60 percent of the electronics market, are subject to a luxury sales tax ranging from 20 percent to 40 percent, Gobel said in referring to the unreasonable classification of goods.

"These taxes have further depressed sales, especially now when people's purchasing power is very weak," said Gobel.

Rahardi saw the electronics industry's role as important, both as a foreign exchange earner and employer in view of its extensive linkages with other industries and services and its labor-intensive operations.

Rahardi said the electronics industry had a potential to generate up to $30 billion in exports in 2010 but this industry required $8 billion in additional investment to improve and diversify its product lines.

Rahardi said electronics exports reached their peak in 1996 with $3.91 billion before declining to $3.89 billion in 1997 and $3.4 billion last year.

He added that the first quarter saw an increase of 12 percent in exports but he did not elaborate more on it, while the industry association foresaw a 5 percent expansion in electronics exports for the whole year. (01)