PT Timor given tax exemptions
PT Timor given tax exemptions
JAKARTA (JP): The government confirmed yesterday that an car assembly company controlled by one of President Soeharto's sons has been given pioneer status and is therefore exempt from import duty on car components and the luxury sales tax on car sales under new regulations enacted last week.
Trade and Industry Minister Tunky Ariwobowo said that, in order to qualify for the pioneer status, automobile companies must use an Indonesian brand-name for its cars, must be owned wholly by Indonesian shareholders and must gradually develop improved national technology, engineering and design capabilities.
The announcement comes only two days after Tommy, the popular name of the President's youngest son Hutomo Mandala Putra, launched the prototype Timor sedans which his company, PT Timor Putra, assembled from components imported from South Korea's Kia Motor company.
"The customs and excise tax directorate general has been notified of the import duty relief for PT Timor Putra," Tunky said when he announced four new government regulations on the" National Automobile Industry" program.
The new rulings, consisting of a Presidential instruction, a government regulation and a decree by the trade industry minister and finance minister, were enacted on Feb.19 but were announced only yesterday.
Executives of most automobile companies who were summoned by Tunky on Tuesday and Wednesday for technical briefings on the new regulations seemed to be shocked by the new rulings as none of them could immediately qualify for the pioneer status.
Tommy stunned domestic car companies by announcing at the launch of the Timor prototypes on Monday that his cars would be sold at half the price of Japanese makes of the same class (1,600 cc engine displacement capacity).
He said PT Timor Putra would eventually manufacture Timor cars by itself.
PT Timor Putra, a joint venture with Kia Motor which, is 70 percent controlled by Tommy through Timor Putra and PT Indauda, a car assembling company based in Surabaya.
"But the Timor cars will be produced by PT Timor Putra as a wholly-Indonesian owned company," Tunky said yesterday in referring to the requirement that an automobile company has to be wholly owned by national shareholders to qualify for the pioneer status.
Tunky said yesterday that the national automobile industry program is designed to develop national self-reliance in the automobile industry to allow the industry to export its products and to procure components from different sources.
The regulations stipulate that the local content of cars produced by automobile companies which have been granted the pioneer status must exceed 20 percent at the end of the first year of production, 40 percent after the second year and more than 60 percent after the third year.
The exemption from import duties and the luxury sales tax automatically slashed the show-room prices of cars in the country because sedans are subject to 100-200 percent import duties and luxury sales tax rates of 20 to 35 percent.
The rulings stipulate that car components imported by pioneer automobile companies can be used only for production and for replacement.
Companies which are granted the import duty and luxury sales tax exemptions will be audited by the trade and industry ministry with regard to the amount of local content they have achieved.
If the minimum local content requirements are not fulfilled, the automobile companies will be required to pay the import duties and luxury sales tax due on those cars.
Subronto Laras, president of the Indomobil Group, the second largest assembler of automobiles in the country, declined to comment on the new rulings.
"I need two weeks to study the provisions of the new regulations," Subronto said after he and the executives of other major car companies met with Tunky yesterday.
Subronto ruled out the possibility of selling locally made sedans at Rp 35 million a unit, as promised by Tommy for his Timor cars, if the import tariffs and taxes imposed on automobiles are not slashed.
In a related development, House member Budi Hardjono of the industry and trade commission, commented yesterday that government regulations on the car industry should be transparent and the same for all companies.
"Government regulations cannot work in favor of specific companies at the expense of others," Budi said, warning that discriminate rulings might prompt Japanese investors here to relocate their plants overseas. (kod/vin)