JAKARTA (TheInsiderStories) – Indonesian government plans to evaluate the income tax rate (VAT) of imports, said one official on Monday (20/08). The planned was to control the level of current account deficits that exceed the level of 3 percent of gross domestic products (GDP) in the second quarter of 2018.
“We are still discussing internally with the Directorate General of Taxation, Customs, the Fiscal Policy Office, and also with the Minister of Industry, Trade, Bank Indonesia and the FSA (Financial Service Agency,” Finance Minister Sri Mulyani Indrawati told press at her office.
Previously, government has evaluate income tax for export proceeds as an attempt to stabilize Rupiah exchange rate against US dollar, said her on August 14. After the evaluation, Indawati said, will be followed by the publication of the Finance Minister Regulation.
Earlier, she ensure a reduction in a number of goods imported raw materials and consumer goods will be done by not disturb the momentum of economic growth. Reduction of import of materials needed to control the current account deficit (CAD).
“We’re looking for a commodity that has a ‘multiplier effect’ smallest to growth, so that when pressed, can still be maintained growth momentum,” the minister said last week.
To that end, she said, the plans to reduce imports began to be pursued to import raw materials and capital goods, especially for infrastructure projects owned by state-owned company PT Pertamina and PT Perusahaan Listrik Negara.
Then, import restrictions also made to the consumer goods mainly against 500 types of commodities in trade and industry sectors that can be produced domestically. This also supported by measures to control the import of which is with the imposition of the increase in income tax rates and other tariff import that can withstand the high CAD.
Head of Fiscal Policy Office Suahasil Nazara added, one example of a reduction in imports of raw materials and capital goods that can be done is imported turbines required for the construction of power plants.
“For example if a power plant in Java, which already has a sufficient power supply, it does not have now, there is a delay that could reduce the pressure of imports,” he said.
Nazara stated that other measures to reduce imports, especially of oil and gas sector is to enforce application of oil or biodiesel fuel (B20) which is currently being pursued by the government.
Coordinating Minister for Economic Affairs Darmin Nasution has said that the government will accelerate the implementation of B20 on subsidized and non-subsidized diesel fuel by Sept. 1, 2018. He added, that the government will launch a presidential regulation soon.
This policy expected to reduce imported fuel with a foreign exchange saving up to US$2.3billion by the end of this year. In addition, this policy will increase palm oil price amid threat of European Union ban.
Indonesia booked $89.04 billion in import in the first semester of this year, significantly higher than export at $88.2 billion. It made the country booked a trade balance deficit of $1.02billion in the first semester of this year. This condition widened CAD and put more pressure on the rupiah exchange rate against the US dollar.