Taxed Batam no shoppers' lure

Fadli, The Jakarta Post/Batam

For the past eight months, business has been on the downturn for Setiawati, 27, an attendant at Seline Boutique, which sells foreign apparel, perfume and accessories brands in the Nagoya industrial area on Batam Island.

"Since January, only about 60 people come into our boutique each day, and most of them left after learning that our prices were not much different from those offered at shops in Jakarta and other places," she said in dismay.

Setiawati was speaking of the imposition of value-added tax on cigarettes, liquor and automotive products, as well as luxury sales tax, by the Batam Industrial Development Authority and its effect on vendors and traders.

The new taxes were imposed on Jan. 1 under Government Regulation No. 63/2003 on value-added tax and luxury sales tax for Batam industrial zone, Riau Islands province.

The government enacted the regulation to ensure that only export-oriented industries would be exempt from customs duties and taxes, and to prevent the influx of foreign goods through Batam.

Although value-added tax is placed on only three commodities, the prices of many other imported goods on Batam have also increased unaccountably.

For example, a 75 ml bottle of Bulgari perfume used to sell for Rp 180,000 to Rp 250,000 before January, but is 30 percent more expensive now.

Data from the Batam Statistics Agency shows that consumer spending during the seven months to July had declined steadily.

An official with the agency, Mangamputua Gultom, said the price increase for consumer goods, such as household appliances and apparel, to which the introduction of the new taxes partly contributed, had discouraged people from spending.

He called on the government to revoke the new tax policy; otherwise, traders and their businesses would face a dismal future.

"The low spending has dealt a severe blow to traders and will, in the long run, threaten their existence," Mangamputua said.

The impact of the new taxes was also felt by hotel operators, who said occupancy rates had fallen during the first semester.

Anas, president director of Novotel Batam hotel managing firm PT Graha Seraya Pratama, told The Jakarta Post that over the last eight months, the hotel's occupancy rate hovered between 40 percent and 50 percent, from 60 percent to 80 percent in the months preceding the imposition of the new taxes.

"Batam has been synonymous with affordable imported goods, but the government's unpopular tax policy has increased their prices. Batam is no longer a haven for shoppers, and this has adversely affected hotel occupancy rates," he said.

Anas said the introduction of the taxes had only aggravated the hotel industry's woes since the Severe Acute Respiratory Syndrome and bird flu scares.

"Investors are still uncertain as to whether to invest in Batam or not, and the introduction of value-added tax and luxury sales tax have added to the confusion," he said.

A similar grievance was aired by Abidin from the Batam chapter of the Indonesian Employers Association (Apindo), who said the implementation of the new taxes would raise living costs.

"The high living costs will, in turn, prompt a hike in workers' minimum wage, which will not be beneficial for employers," Abidin said.

He said a major factor that attracted investors to Batam was its cheap labor. "If the minimum wage is no longer attractive, they will leave Batam," he said.

Current minimum wage on Batam is only Rp 602,000, far below the minimum living cost of Rp 800,000.

The Batam municipal administration will begin deliberating a new minimum wage next month, taking into consideration that workers would be subject to the new taxes and would face higher expenses for basic needs.

The local government was apparently powerless to stop price hikes in other goods, although Batam Mayor Nyat Kadir called on traders in March not to raise the prices of consumer goods except for liquor, cigarettes and automotive products.

"We will take market measures to control the price hikes," he said.