Govt to revise duty on commodities
Rendi A. Witular, The Jakarta Post, Jakarta
The government will revise the policy on export duty for crude palm oil (CPO) and coal, as well as on luxury tax for automobiles, following concerns that the performance of the industries could otherwise be severely affected.
The decision was made on Thursday in a limited meeting presided over by President Susilo Bambang Yudhoyono and attended by Coordinating Minister for the Economy Boediono, Minister of Finance Sri Mulyani Indrawati and Minister of Industry Fahmi Idris.
"We have decided to revise the policy since there is an indication that it would severely disrupt the performance of several industries at a time when the economic condition is not that favorable," said Boediono.
New decrees on the revisions are expected to be issued before the new year, according to Mulyani.
She said the government would cut export duty on CPO to 1.5 percent from the initial plan of 3 percent, hopefully starting from Dec. 26, to help local producers compete in the international market.
The benchmark export value to be taxed will be based on the CPO free-on-board (FOB) international price, which currently stands at around US$420 per ton. The price will be reviewed regularly to reflect market prices.
The government planned to impose 3 percent export duty on CPO in September. However, the policy has not been implemented because the government is still preparing to revise the minimum export price for the product.
During the meeting, the government also agreed to proceed with its plan to impose 5 percent export duty on coal but with a more flexible tax refund facility for coal producers in order to help reduce their burden.
"There is no changes in the rate. But the government will try to speed up the tax refund process in order to reduce the operational burden of coal producers," said Mulyani.
The finance ministry issued a decree on Oct. 11, stipulating that all coal exports be liable to 5 percent duty based on FOB prices.
The Indonesian Coal Mining Association had criticized the export duty policy, arguing that it could deter investment rather than meet its purpose of generating more revenue and securing a local supply of coal.
The controversial luxury tax policy on automobiles was also discussed during the meeting, with the government eventually agreeing to cancel the policy due to concerns that the industry would collapse because of the recent economic slump.
"Automobile sales have already decreased over the past couple of months due to people's lower purchasing power. The performance of the industry will further decline should we insist on imposing the tax," said Mulyani.
Based on a presidential decree issued on Oct. 25, buyers of sedans with an engine size of between 1.5 liters and 3.0 liters will have to pay 50 percent tax on the benchmark price, from the previous 40 percent.
Those purchasing vans with an engine size of 1.5 liters to 2.5 liters will have to pay 25 percent tax, from 20 percent, according to the presidential decree.
Industry players have slammed the decree, which they warn will deliver a devastating blow to already falling auto sales hit hard by high inflation and interest rates.
Fahmi said a revision would help drive automobile sales to reach more than 500,000 units next year, which was expected to generate as much as Rp 8.6 trillion ($877.5 million) in state tax proceeds.