Govt policy to scrap VAT on books 'trifling'

Tertiani ZB Simanjuntak, The Jakarta Post, Jakarta

The government's decision to scrap the 10-percent value-added tax (VAT) for books on religion, education and holy books, both imported and locally-printed, is a welcome development but insufficient to stimulate reading habits among Indonesians.

The Indonesian Publishers' Association (IKAPI) chairman Arselan Harahap said on Monday that the exemption of the VAT on the distribution of imported and domestically-published books on religion, education and holy books reduced the prices by 4 percent at the most.

"The amount is insignificant if we want to educate the public at large through good readings," Arselan said at a press conference here on Monday.

Arselan called on the government to get rid of the hefty taxes beleaguering the country's publishing industry so that it could produce more affordable books.

Currently, publishers must pay a royalty, plus VAT, to authors, translators, illustrators and book designers. In the printing process, the publishers must still pay taxes for papers and ink, all of which are charged to consumers.

Such taxes and levies have resulted in expensive book prices, pushing the country's publication industry into in a vicious cycle, whereby the public doesn't buy books because they are too expensive, while publishers must survive on thin margins due to a low demand.

Data from the World Bank and UNESCO Statistical Year Book revealed that the number of literate Indonesians is approximately 84 percent of total population of 214 million, and that Indonesia spends less than US$1 per person on books a year.

The country's publication industry turns out between 3,000 and 4,000 book titles per year, or 3,000 copies per title.

The number is clearly inadequate to meet the needs of 214 million Indonesians.

Harahap expressed the hope that the government would give royalty facilities similar to neighboring Malaysia, where no VAT is applied to the royalty paid to authors valued less than 5,000 ringgit.

The government issued in December 2000 regulation No. 146/2000 on the exemption of VAT on particular items, including military equipment, ammunition and books.

Books on the following topics are exempted from the regulation, however: entertainment books, novels, magic, advertising, promotion of a business, non-education catalogs, caricatures, horoscope, horror, comics, and painting reproductions.

However, the regulation states that other topics may be exempted from VAT after obtaining approval from either the Minister of National Education, or Minister of Religious Affairs or designated officials.

The regulation went into effect on March 1, 2002.

IKAPI welcomed the ruling on Monday, but expressed doubts that the move would invigorate the country's battered publishing industry.

The application of the regulation on books industry is executed under the Ministry of Finance Decree No. 353 issued on June 2001, and the Directorate General on Taxation circular issued on February 2002.

Director for Industrial Value-added Taxes of the Directorate General on Taxation Irawan explained that the regulation automatically wiped out the mechanism in which publishers usually spend extra in seeking approval for tax exemptions.

"We believe that the tax exemption will reduce the spending cost and will later reduce the price of books. We identify a potential loss to the state, but we expect a trade off where more consumers will buy books which later will increase the publishers tax income," Irawan told reporters.

Meanwhile, IKAPI declared Monday, May 17 as the country's National Book Day. The date was chosen because it was in conjunction with the first announcement of the National Book Month which falls on every May.

It is also the birthday of IKAPI.

"There will be discounts on bookstores on that day ... people are expected to buy at least one book -- or give it to their loved ones as a gift," Harahap said.