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)