Auto industry calls for luxury tax cut on sedans

The Indonesian Automotive Manufacturers Association (Gaikindo) chairman Jongkie Sugiarto said on Tuesday that the association had long lobbied the Finance Ministry to reduce the luxury tax on sedans.

He said the cut in luxury tax for sedans from 30 to 10 percent, a similar rate for multi-purpose vehicles, would encourage producers to manufacture more sedans, not only for the domestic market but also for export.

“Because of cheaper taxes, Indonesia has now become the king of MPVs, but our exports are just 200,000 units per year, from a total production of 1.3 million,” Jongkie said during a discussion on the automotive industry organized by the Indonesian Business Data Center (PDBI) in Jakarta on Tuesday.

“Thailand produces 2 million units of vehicles per year, but it exports 1.2 million because they produce everything from sedans and pickups to MPVs. The Thai government also does not discriminate in the taxes on the automotive products.”

He said Gaikindo had already hired experts at University of Indonesia’s Institute for Economic and Social Research (LPEM UI) to carry out independent research on the issue and the result was that a luxury-tax cut on sedans would increase sales by 17 percent.

This year, Gaikindo’s efforts received support from Industry Minister Airlangga Hartarto, but it was still struggling to convince the Finance Ministry.

“We have lobbied for so long [the Finance Ministry], but it has not moved,” Jongkie said, adding that the association had proposed the tax cut since 2011. (bbn)