Government's policy on luxury cars comes under fire

Government's policy on luxury cars comes under fire

By Mochammad N. Kurniawan

JAKARTA (JP): The government's tax policy on luxury cars has come under fire, with critics saying the low import duty and taxes imposed on these vehicles allows the rich to flaunt their wealth at a time when many Indonesians are struggling to survive.

Noted economist Faisal Basri said the government errored in lowering the import duty and taxes on luxury cars in June last year, because the presence of these vehicles on the streets only caused envy in the middle of an economic crisis.

"Where is the government's sense of justice?" he said during a discussion with auto industry players and activists who oppose the presence of luxury cars in the country at the Gaikindo 11th Auto Expo 2001.

"When many people are suffering from hunger and we see so many luxury cars roaming the streets ... it's not right," he added.

The government reduced the import duty and taxes on luxury cars to about 155 percent from 300 percent as part of its effort to boost its tax revenue.

Faisal urged the government to impose a progressive import duty and taxes on luxury cars, which he said would help the government raise its tax revenue while providing justice to the people. However, he did not provide any details of his proposed progressive tax scheme.

MS Jihad, the head of the Anti-Luxury Cars Movement (GAMM), who also spoke during the discussion, demanded the government return to the 300 percent import duty and taxes on luxury cars, not only to limit the number of luxury cars but also to make them "disappear" from the country's roads.

"If the taxes are very high, surely luxury cars will become unaffordable and therefore they will be off of the streets," he said. "It's a similar to banning the cars."

He said the 300 percent figure was based on a study of neighboring Malaysia, which imposed a 300 percent tax on luxury cars.

"The public there has no problem with that. It does not even contradict World Trade Organization (WTO) policy, which our government always uses as an excuse to ease import duties," he said.

He also demanded the government publish the tax filings of luxury car owners to see whether they gained their wealth through corruption.

Last year GAMM staged a rally outside the Jakarta Convention Center, demanding the government ban the import of luxury cars, while inside hundreds of visitors attended Auto Expo 2000, organized by the Association of Indonesian Automotive Industries (Gaikindo).

The protesters last year brought with them a cardboard model of a vehicle, with the words "luxury car" written on it, and set it ablaze.

Bambang Trisulo, the chairman of Gaikindo, said he did not object to the proposal to raise the import duty and taxes on luxury cars, saying it would not hurt the country's automotive industry.

"All of the luxury cars are imported and the market is small," he said.

Of the 300,000 cars sold in the country last year, about 15,000 were imported completely built-up (CBU) luxury vehicles.

Bambang also said the local automotive industry would not assembly luxury cars because of the extremely high operating costs.

Budhiman Sirod, the chairman of the Indonesian Motor Vehicle Importers Association, said if the government raised the import duty and taxes on luxury cars to 300 percent, there would be no more importers for these types of vehicles.

"What for? Nobody would buy the cars. The price would be too high for them," he said, adding that importers currently had to sell the CBU luxury vehicles at 2.1 times their original sticker prices because of the current import duty and taxes.

But he refused to say whether the association would appeal to the government not raise the import duty and taxes.

"It's the government's policy, not ours," he added.