Govt revokes luxury tax on shampoo, PCs

JAKARTA (JP): The government said on Wednesday it had decided to revoke luxury sales taxes on several products including shampoo and computers starting next month,

The finance ministry said in a statement that previously the items were subject to luxury taxes of between 10 percent and 75 percent.

Among the other items that have been taken off the luxury sales tax lists are electric irons, walkie-talkies, materials containing alcohol used in the food and beverage industries, Christmas lamps, tapes and jewelry.

"This is to provide a greater sense of justice and legal certainty," the statement said.

Last January, the government imposed a luxury sales tax on 41 consumer goods, including television sets and other home appliances.

It said the measure was necessary to help boost tax revenues, and prevent the country from being flooded with imported luxury items.

The government is struggling to contain the state budget deficit at around 3.5 percent of Gross Domestic Product (GDP).

An estimated shortfall in tax revenues and a persistent weak rupiah threaten to widen the budget deficit to 6 percent of GDP.

Yet slapping luxury taxes on what many called basic household products drew sharp criticism from various industry associations and consumers.

Electronics producers warned that the tax policy would not only hurt local manufacturers, but also consumers among the lower income group.

Earlier, the Indonesian Computer Dealers Association (Apkomindo) said sales had dropped after the government imposed a 20 percent luxury sales tax on computer products.

Prior to the luxury tax, computer hardware was only subject to 10 percent value added tax.

Under the new tax policy, the government will also set thresholds on certain products, below which luxury tax does not apply.

"For instance, a luxury sales tax of 10 percent will be imposed on toys worth more than Rp 100,000 (about US$8.7)," the statement said.

The same applies to lipsticks, where a 10 percent luxury sales tax is imposed on items worth more than Rp 25,000.

The government will also slap a 20 percent luxury sales tax on houses if they cover more than 400 square meters, or are worth over Rp 3 million per square meter.

The same applies to apartments of more than 150 square meters, or worth over Rp 3 million per square meter.

Footwear valued at Rp 500,000 or more per item also face a 40 percent luxury sales tax. A 40 percent rate is also imposed on household appliances worth more than Rp 100,000, and furniture and office equipment worth Rp 15 million a set, or Rp 2 million per unit respectively.

"Every six months, these policies will be reviewed to obtain a tax policy which reflects Indonesia's economic development," the statement from the finance ministry read. (bkm)