Govt may delay tax hike plan

Antara, Jakarta

In a proposal sent to President Susilo Bambang Yudhoyono and Minister of Finance Sri Mulyani Indrawati, Minister of Industry Fahmi Idris has urged the planned increase in the automobile luxury tax be delayed.

"We have sent a proposal to the President and the minister of finance," Fahmi said on Tuesday.

He made the proposal amid fears the higher luxury tax outlined in an Oct. 25 presidential decree would hurt the automotive industry.

The decree raises the tax on sedans with an engine size of between 1.5 liters and 3.0 liters to 50 percent of the benchmark price, from 40 percent. The tax on vans with an engine size of between 1.5 liters and 2.5 liters will go up to 25 percent from 20 percent.

"The proposal on the new tax rates and the time line of the implementation will be discussed further. The discussion could last five years but it might also finish in a month," Fahmi said.

He also said he would encourage global automotive manufacturers to increase their investment in the country and make Indonesia their regional production base.

"It is not fair if they (the manufacturers) move their production bases to Thailand and market their products in Indonesia," he said.

The automotive industry has suffered under rising interest rates, following the central bank's decision to raise its key rate to 12.75 percent on Dec. 6. The Association of Indonesian Automotive Manufacturers has revised down this year's sales target from 550,000 units to 530,000 units.