Indonesian Economic Minister Announced the Implement of New Value Tax Rate at the Finance Ministry Office (05/09) - Photo by TheInsiderStories

JAKARTA (TheInsiderStories) – The Indonesian government decided to raised the value tax of Article 22 for 1,147 imported commodities to 7.5 percent to 10 percent from the original rate around 2.5-10 percent, said one senior official on Wednesday (05/09). While the imposition of income tax for other specified 57 commodities maintained at 2.5 percent.

Finance Minister Sri Mulyani Indrawati said, this policy is taken to address the current account deficit (CAD) which is currently rated by the economist could disrupt the Indonesian economy if not addressed. Bank Indonesia reported, last July Indonesia’ CAD recorded US$8 billion, or 3.09 percent of the total gross domestic product.

“The government will be all out to issue all policy instruments to balance our current account deficit back in neutral because the global situation un-muted and the capital inflow came again,” the minister said at a press conference at her office accompanied by Coordinating Minister for Economic Affairs Nasution, Minister of Industry Airlangga Hartanto, Trade Minister Enggartiasto Lukita on Wednesday (05/09).

The minister has has signed the Finance Minister Regulation and will effective starting next week. This rule change was made after an evaluation on the PMK 132/PMK.010/2015, PMK 6/PMK.010/2017 and PMK 34/PMK.010/2017 on Income Tax Collection Article 22.

Based on the results of that evaluation, the government concluded to adjust income tax rates of Article 22 of the 1,147 tariff heading as follows:

a) 210 commodity items. rose from 7.5 percent to 10 percent. In this category including luxury items such as cars and big motorcycles.

b) 218 ​​commodity items, up from 2.5 percent to 10 percent. Included in this category is the entire consumer goods has been largely be produced in the country such as electronic goods (water dispenser, manganese cooling, lighting), daily needs such as soap, shampoo. cosmetics, as well as cookware and kitchen.

c) 719 commodity items, up from 2.5 percent to 7.5 percent. Included in this category all goods used in the process of consumption and other purposes. Examples of building materials (ceramics). tire. audio-visual electronic equipment (cables, speaker box), textile products (overcoat, polo shirts, swim wear).

According to Indrawati, the impact of these new rules will be able to slow the imports by 2 percent over last year, but provides minimal impact on inflation.

Boost Export

Hartarto added, the government will continue to encourage the export of Indonesian commodities such as food, palm oil, chemical, metal (steel), rubber goods, car, and as well as clothing and footwear.

He exemplified export cars made by Toyota Motor Corp. Two years ago the Japanese car-maker invest Rp20 trillion (US$1.38 billion) in Indonesia and is now able to export 217,000 units of car with the revenue of $3 billion.

He added that, apart from Toyota, other automakers, PT Suzuki Indomobil Motor also plans to export the car this year. He estimates that the Indonesian car exports can achieve 250,000 units in 2018. Currently, the total national car production is targeted to 2 million units, with 1.2 million domestic consumption and export 250,000 units.

“It’s the reason we restrict the import of over 3000 cc since we’ve been able to produce themselves.,” He said.

Lukita adds, that his ministry will issue an import regulation for steel, food, alcohol drink and natural resources. Trade ministry will issue a ministerial regulation which requires importers using letters of credit (L/C) when engaging in import operations.

“To seal the document import regulation that we change from the border post had become border through Bonded Logistics Center.,” He explained.

The government also plans to relax the export permit for coal, crude and semi-finished rattan to increase foreign exchange earnings. It also will continue to accelerate economic cooperation such as the Indonesia-Australia Comprehensive Economic Partnerships Agreement will be signed in November. As for the PTA, EFTA, RCEP is expected to be finalized this year and could be implemented next year.

Further negotiations on the Generalized System of Preferences facility with United States, he added, is in the final process. “Hopefully it can get the GSP,” said the trade minister.

The policy of import control is not a new policy was first implemented by the Government. The government never imposed a similar policy in 2013 and 2015.

In 2013, the Government published the PMK Number 175/PMK.011/2013 also in order to control the imports after Taper Tantrum. At that time, the government raised income tax rates Article 22 on 502 commodity items of consumption from 2.5 percent to 7.5 percent.

In 2015, the government continued this policy by issuing PMK number 107/PMK.010/2015. Through the regulation, government raised income tax rates Article 22 on 240 commodity items of consumption from 7.5 percent to 10 percent on certain consumer goods were abolished sales tax on luxury tax.

Payment of Income Tax Article 22 Income Tax is a payment in advance which can be credited as part of the payment of income tax payable at the end of the tax year. Therefore. 22 Income tax rate increase, in principle, will not burden the manufacturing industry.

Email: linda.silaen@theinsiderstories.com

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