Roundup: Indonesia's car value-added tax incentive aims to revive local industry

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JAKARTA, Jan. 22 (Xinhua) -- The Indonesian government's Value Added Tax (VAT) incentive policy on the automotive sector will benefit the country's middle and upper classes and have a multiplier effect on Indonesia's economic recovery, an official said.

"The government's policy is logical and good," Head of the Fiscal Policy Agency of the Finance Ministry Febrio Kacaribu said in his statement in Jakarta on Thursday.

"The economic growth in the third quarter of 2021 was 3.5 percent, whereas in the second quarter it was 7.1 percent. This made the economic growth hampered as we previously hoped to reach 5 percent in 2021," he added.

Therefore, the government continues to stimulate economic growth with favorable policies, one of which is the tax incentive in the automotive sector, he explained.

Under the policy on the automotive sector, the local purchase (a certain percentage in purchasing components in the country that manufacturers must fulfill to get incentives) reaches 80 percent, and this is considered to have a very high impact on national economic growth, he said.

President Widodo has approved the extension of the luxury sales tax (locally known as PPnBM) incentive for automotive products, Coordinating Minister for Economic Affairs Airlangga Hartarto said.

Cars with a selling price below 200 million rupiahs (about 13,958 U.S. dollars) or LCGC (Low Cost Green Car) are subject to a 3-percent tax, and the government will cover the entire tax in the first quarter of 2022, the senior minister told a press conference last Sunday.

"In the second quarter, 2 percent of PPnBM is borne by the government, in the third quarter 1 percent is borne by the government, in the fourth quarter (the public) pays in full, which is at the rate of 3 percent," Airlangga said.

Meanwhile, for automotive products with the prices of 200 million rupiahs (about 13,958 U.S. dollars) to 250 million rupiahs (about 17,448 U.S. dollars) with a normal PPnBM rate of 15 percent, the government will bear half the tax in the first quarter of 2022, he noted.

Industry Minister Agus Gumiwang Kartasasmita explained that the tax reduction will have a positive impact on increasing sales of domestically produced cars, as cars below 250 million rupiahs are the mainstay of the national automotive industry.

Marketing Director PT Toyota Astra Motor Anton Jimmy Suwandy admitted that the extension of the luxury goods sales tax incentive will certainly increase the enthusiasm of the automotive industry.

"Yes, hopefully this support can increase consumers' demands and drive the national automotive industry," Suwandy was quoted by Antara news agency as saying on Tuesday. Enditem

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