Govt tells Timor to repay waived import, luxury taxes

JAKARTA (JP): PT Timor Putra Nasional has been ordered to repay the import duty and luxury tax exemption it received on all the 39,000 Timor cars it imported from South Korea since 1996.

Minister of Industry and Trade Rahardi Ramelan said on Wednesday Timor was liable to pay the penalty because it had not followed the government's guidelines in exchange for the tax facilities it received.

"Timor did not abide by the ministry's decree to receive the import duty and luxury tax exemptions, therefore it must repay the unpaid taxes to the government," he told a hearing with the House of Representatives.

This will apply to some 25,000 cars sold since late 1996 and the 14,000 still in stock.

From early 1996 until January, Timor, controlled by former president Soeharto's youngest son Hutomo Mandala Putra, was the sole recipient of import duty and luxury tax exemptions as part of the national car program.

This helped make Timor's production costs 60 percent less than other carmakers' in Indonesia.

Rahardi said the tax facilities were given to Timor on condition that it conducted counter trade with South Korea, where the cars were produced.

Under the 1996 ministerial decree, Korea's Kia Motors Corporation, makers of the original cars, were to buy auto parts from Indonesia worth 25 percent of the value of the assembled cars to be exported to Indonesia.

Timor was also supposed to use a significant proportion of local content in the car, Rahardi said.

The car was supposed to contain 20 percent local components by the end of the first year of operations, 40 percent by the end of the second year and 60 percent by the end of the third year.

If the company failed to meet the required local content levels the government would penalize it by requiring it to pay the duty and luxury sales tax, according to the decree.

In the first year, the company could import 100 percent of the components without having to pay the duties provided it could meet the 20 percent local content mark by the end of the year.

Rahardi said none of the requirements were ever fulfilled by the company, according to an evaluation by state-owned surveyor PT Sucofindo.

"The results of Sucofindo's survey showed that Timor never met the requirements, thus it must be penalized," he said, adding that he had reported the penalty to the Ministry of Finance.

He said the penalty applied to Timor cars which had been sold but the charge could not be passed on to the buyers.

"We cannot charge Timor car buyers the taxes because the deals have already been completed, the company must take the responsibility," he said.

Earlier this year Indonesia also lost a dispute over Timor's tax facilities at the World Trade Organization. (das)