Ministry of Industry Studying Tax Cut that GAIKINDO Proposes

655-otomotif_pameranJAKARTA— Ministry of Industry) states it has been considering the request of the Association of Indonesia Automotive Industry (GAIKINDO) that government needs to slash the sales tax on luxury goods (PPnBM) for a small sedan and sport utility vehicle (SUV).

With 30%-to-10% cut for both models, GAIKINDO hopes the price is more affordable so that the production capacity can be increased. GAIKINDO brought the proposal to meet the Minister of Industry Airlangga Hartanto at the office of the Ministry of Industry on 8 August 2016. The two sides discussed the automotive industry barriers. One of the challenges for the automotive industry is a matter of luxury sales tax for small sedan car and a small SUV.

With the tax reduction, there is a chance the automotive industry in Indonesia to produce both types of cars. Growing manufacture will encourage domestic investment and component industry growth. Among other benefits, the export is also open. With the ability of the car industry in Indonesia producing both models, it reduces dependence on imported models.

Director General of Metal, Machinery, Transport Equipment (ILMATE) Ministry of Industry Mr I Gusti Putu Suryawirawan said that the Minister of Industry Mr Airlangga Hartanto has received the message. “We have been studying it,” he said.

The Ministry needs to assess the impact of the tax reduction. The Ministry’s concerns include a question on how much investment flows may be going in and how many workforces this may trigger. “If there is no potential related to investment and employment, we do not want to sacrifice the tax,” he said.

Chairman of GAIKINDO Mr Yohannes Nangoi is convincing that tax cuts of mini sedan and a small SUV will positively impact the market. “Exports could be increased due to global market where the need for sedan is increasing more than MPV,” he said.

So far, Indonesia has been producing and marketing compact multipurpose vehicle (MPV) model. When it comes to export, Indonesia delivers more MPV models. On the other hand, Indonesia barely produces any sedan model.

In its note, GAIKINDO is pointing out at an historical aspect of MPV production and market in Indonesia where the Government made a bold intervention in the form of incentives: PPnBM cut. The same thing can be done in the context of the small sedan and SUV. (*)