New luxury tax policy unrealistic: Electronics makers
JAKARTA (JP): Electronics producers on Friday urged the government to review the new luxury tax ruling, describing the move as unrealistic.
The new tax policy will not only hurt manufacturers but also consumers, especially those of the lower income group, as many of the products slapped with the luxury tax are no longer considered luxury items, they said.
Marketing manager of PT LG Electronics Indonesia Sung Khiun said products such as television sets with screen sizes of between 14 inches and 20 inches should be excluded from the list as to not disadvantage the lower income group.
"Where will they find entertainment and information if televisions become more expensive because of the higher tax?" he told The Jakarta Post.
Sung said flatirons should also be exempt from the tax as they were now considered a necessity rather than a luxury.
The government has imposed a luxury tax between 10 percent and 75 percent on 41 groups of items considered as luxury goods. But many of the products which are subject to the new tax are no longer regarded as luxury goods.
The tax, which is effective this month, among other things, renders a 10 percent luxury tax on televisions with screens below 21 inches and refrigerators with capacity below 230 liters.
A 20 percent tax is imposed on refrigerators (with capacity of more than 230 liters), heaters, air conditioners, washing machines, flatirons and televisions with screens between 21 inches and 29 inches.
Televisions with screens between 29 inches and 34 inches are given a 30 percent tax, those with screens measuring between 34 inches and 43 inches, a 40 percent tax, and televisions with screens measuring more than 43 inches, a 50 percent tax.
Separately, chairman of the Indonesian Retail Merchants Association (Aprindo) Kustarjono Prodjolalito said the new tax policy would affect electronics producers who sell to retailers.
He said in anticipation of a lower customer demand, stores will reduce their order for electronic goods from producers.
"We won't exactly be hurt by the new tax policy, but our electronics sales will drop," Kustarjono said.
The new tax policy will encourage smuggling because the price difference between legally imported goods and smuggled goods will be even more pronounced, Sung said.
"To import a 14 inch television for example, an importer needs to pay at least 40 percent in taxes," he said, explaining that 20 percent was for import duty, 10 percent for luxury tax and another 10 percent for value-added tax.
"This will cause prices to rise, so the lower income group won't be able to afford them," he said, adding that they would turn to smuggled goods instead.
Sung said the luxury tax would also stall the growth of the Indonesian electronics market.
"As prices of electronic goods rise, the demand for those products will decrease," he said.
The electronics sales growth will not be as high as it was projected, Sung said. The sales growth this year was projected to be about 40 percent, compared to the 30 percent growth last year. (tnt)