Indonesia targets higher taxes for imported luxury goods
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Indonesia is planning to impose a higher luxury tax for imported retail goods in its latest attempt to dampen domestic consumption in Southeast Asia’s biggest economy, an official at the finance ministry said today.
The G20 economy has been struggling to stabilise its external balance sheet, due to persistently high imports and weak structural reforms, which is putting downward pressure on the ailing rupiah currency.
“For our luxury tax, there are other goods that will be subject for harmonisation — consumer goods,” Deputy Finance Minister Bambang Brodjonegoro said on the sidelines of a Thomson Reuters conference.
The government in August announced a fiscal package, which include a higher luxury tax on imported cars, to reduce imports.
The new increase would be significant, said Brodjonegoro, who was unable to give further details on current or the new luxury goods tax plans.
“Likely, clothes (and) bags,” he added, when asked which luxury items would be hit by the new tax.
Since June, Bank Indonesia has raised its benchmark reference rate by a total of 175 basis point to discourage lenders from expanding too aggressively.
Despite intervention by the central bank, the rupiah fell to above 12,000 per dollar in today’s trade.
Indonesia’s finance ministry is expected to announce further details on the new import taxes soon, including increasing taxes for certain foodstuffs and goods.
Questions & Answers
Q.Why is Indonesia planning to impose a higher luxury tax on imported goods?
Why is Indonesia planning to impose a higher luxury tax on imported goods?
Indonesia aims to dampen domestic consumption and stabilise its external balance sheet. The economy has been struggling with consistently high imports and weak structural reforms, which is impacting the rupiah currency.
Q.Which specific items are likely to be affected by the new luxury tax increase?
Which specific items are likely to be affected by the new luxury tax increase?
Deputy Finance Minister Bambang Brodjonegoro indicated that clothes and bags are likely to be among the luxury items targeted. Further details on the new import taxes are expected soon.
Q.Has the Indonesian government taken other measures to address its economic challenges?
Has the Indonesian government taken other measures to address its economic challenges?
Yes, in August, the government announced a fiscal package that included a higher luxury tax on imported cars. Bank Indonesia has also raised its benchmark reference rate by 175 basis points since June.
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