Luxury taxes on cars to go up despite opposition

Luxury taxes on cars to go up despite opposition

The Jakarta Post, Jakarta

The government will soon raise the luxury tax on automobiles
following the issuance of a presidential decree signed on Oct. 25
and released by the Ministry of Finance on Tuesday night.

"This will become effective soon," Anggito Abimanyu, the head
of the finance ministry's Financial, Economic and International
Collaboration Studies Agency, said as quoted by Bloomberg.

"The tariff team is now working on the details and the follow-
up regulations for the presidential decree," he said. He did not
specify how much the government hoped to raise from the higher
auto taxes.

Buyers of sedans with an engine size of between 1.5 liters and
3.0 liters will have to pay a 50 percent tax rate 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 a 25 percent tax rate, from 20 percent,
according to the presidential decree.

Apart from the luxury tax, auto taxes also include an import
duty, value-added tax and a car registration fee -- which all
together add about 40 percent to a vehicle's off-the-road price.

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.

The vice chairman of the Association of Indonesian Automotive
Manufacturers (Gaikindo), Jongkie D. Sugiarto, told The Jakarta
Post the implementation of the policy would slash sales from an
estimated 530,000 units this year, to about 450,000 units next
year. Auto sales last year stood at 483,000.

"Without the decree, car sales are already slowing in the
second half due to soaring inflation and higher interest rates,"
said Jongkie, who is also president director of PT Hyundai
Indonesia Motor.

On-year inflation soared 17.89 percent in October from 9.06
percent on-year in September, after the government raised fuel
prices on Oct. 1 by an average of 126.6 percent.

Gunadi Sindhuwinata, president director of PT Indomobil Sukses
Internasional, the manufacturer and distributor of Suzuki,
Nissan, Volvo and Audi vehicles, has a similar view.

"Gaikindo has asked the government to delay the implementation
of the decree ...," he told the Post.

"With the slumping economy, increasing the luxury tax will
have a greater impact on sales."

Gunadi said industry players should revise the retail prices
of their vehicles, but did not go into detail.

"Hopefully, the economy will improve next year and sales will
reach 520,000 units, similar to this year," he said.

PT DaimlerChrysler Indonesia, whose Mercedes-Benz leads the
premium market segment, also voiced concern the decree would mean
lower sales.

"Our customers have already been hit by higher interest rates
because some receive financing from banks," said the company's
deputy director for marketing, planning and communications,
Yuniadi Hartono, adding that the popular Mercedes C class and E
class would be affected the most by the decree.