Ministry approves transportation subsidy

Ministry approves transportation subsidy

Urip Hudiono, The Jakarta Post, Jakarta

The Ministry of Finance has approved a land transportation
subsidy in the form of fiscal incentives on import duties and
taxes.

With these incentives, the government expects land
transportation operators to be able to slash their operational
costs by 5 percent and avoid having to raise their fares by more
than 10 percent to offset the impact of the recent fuel price
hike.

The finance ministry's director general of customs and excise,
Eddy Abdurrachman, said on Wednesday reduced import duties would
be imposed on completely built-up (CBU) buses, bus chassis and
spare parts for buses that local manufacturers cannot produce,
such as clutches and engine cylinders.

"The import duty reductions will vary from item to item, but
the import duty on several of the items will be scrapped
entirely," Eddy said following a meeting between officials of the
finance ministry, the Ministry of Transportation and the Ministry
of Industry.

"Chassis, for example, will have zero import duty."

The import duty on CBU buses was previously 40 percent, while
import tariffs for spare parts ranged between 10 percent and 15
percent.

Eddy refused to provide more details on the fiscal incentives,
including those for taxi and train operators. He said Minister of
Industry Andung A. Nitimihardja soon would address the issue in
greater detail.

He said he would carefully consider the impact of the reduced
import duties on the revenue of the customs office.

"This is of concern, especially considering that many others
have asked for import duty incentives," he said.

The government has targeted Rp 12 trillion (US$1.28 billion)
in revenue from customs, Rp 28.9 trillion from excise and Rp 271
trillion from taxes this year.

Meanwhile, the head of the finance ministry's fiscal policy
division, Anggito Abimanyu, said the ministry would also consider
providing other forms of fiscal incentives to land transportation
operators.

"We are considering providing tax incentives as well, but
reducing import duties will be the main incentive," he said,
adding that the fiscal incentives would likely affect the revenue
and expenditures in this year's state budget.

The government cut the fuel subsidy and increased domestic
fuel prices by an average of 29 percent starting March 1. It made
the move to reduce the burden placed on the state budget by the
massive fuel subsidy, encourage more efficient fuel use and
prevent fuel smuggling.

Following the fuel price hike, land transportation operators
raised their fares, despite a promise from Minister of
Transportation Hatta Radjasa that the government would provide
them with fiscal incentives.

The government has said it will divert more funds into public
transportation in a bid to cut down extortion and other illegal
fees -- which account for about 40 percent of the operating costs
of public transportation owners. The government said it also
would order local administrations to reduce the fees for
registering vehicles, renting space at bus terminals and for
vehicle inspections.