Govt urged to cancel luxury tax on soft drinks

JAKARTA (JP): Soft drink manufacturers called on the government to revoke the 10 percent luxury tax imposed on their products arguing that they could in no way be categorized as luxury goods.

Chairman of the Association of Soft Drink Industries (ASRIM) Mugijanto said in a press statement on Tuesday that soft drinks, including packaged mineral water and carbonated beverages, were consumed by all classes in society.

The government imposed the luxury tax on soft drinks in January this year in a bid to help increase tax receipts. The government has argued that soft drinks cannot be considered as basic commodities and are consumed by higher-income groups.

But Mugijanto insisted that none of the characteristics of luxury goods were present in soft drinks, citing the results of a recent survey conducted by a research unit of the University of Indonesia.

According to the survey, which covered soft drink consumers in eight major cities across the country, soft drink consumers had an average monthly income of less than Rp 1 million (US$108), and consumed soft drinks on a once per month to once per week basis.

"Soft drinks are consumed as frequently as snacks and ice cream, both of which are exempted from the luxury tax," the survey said.

The luxury tax would only burden consumers on lower incomes, it added.

Mugijanto said his association had conveyed the survey findings to the Minister of Industry and Trade Rini M.S. Soewandi.

"We hope the government will quickly cancel the luxury tax imposed on our products," he said.

He said the imposition of the tax had resulted in lower sales due to falling demand.

The decline in demand had forced soft drink manufacturers to reduce their investment which in turn meant slashing their work forces, he said. (dmr)