Wednesday, 16 April 2014


The Government's effort to jack up income from tax never seemed to ceased although it generated “negative effect” on other part. One of effort was to increase tax of luxurious cars. God permit ting, the Government planned to increase tax for exclusive cars to 125% in April next. So to the rich people, “now is the time to buy luxurious cars”.

Importers of luxurious cars would have to pre-pare themselves to face hard time as the Government planned to increase tax for luxurious cars from 75% to 125% per April this would pose as bad news for lovers of expensive cars.

It was noteworthy that the source of news was twitter account of President Susilo Bambang Yudhoyono, i.e. @SBYudhoyono where the plan was publicized. Besides President SBY account also explained that the tax-imposed luxurious cars consisted of sedan or station wagon with engine capacity 3,000cc/combustion engine and compression motor type.

The automotive tax as mentioned by the President's account was orientated to Sales Tax of Luxurious Goods [PpnBM]. In fact increase of PpnBM was somehow too late. According to schedule, it should be effective as per March 20. The increase PpnBM naturally had its impact on price of luxurious cars. With increased tax up to 125% the price would predictably increase between Rp. 100 million to Rp. 200 million per unit.

This Government's plan made a number of Brand Holding Agents [APM] to scheme up a business strategy to prevent sales turnover from being eroded. For information, sales of luxurious cars of capacity above 3,000cc was around 6,000 - 7,000 unit per year. The marketing campaign message would be "Now is the time to buy your dream price before price increases!”

The Ministry of Trade supported increase of Sales Tax on Luxurious Goods [PpnBM] to reduce the number of luxurious cars. Trade Minister Muhammad Lufti stated that PpnBM could protect products of the local market. Some automotive producer companies were planning to invest their capital in Indonesia as Indonesia was seen as a vast market.

It was reported that President SBY had signed Government Regulation [PP] on Increased Sales Tax for Luxurious Goods [PPnBM] luxurious cars above 2,500cc. Soon this PPnBM Tax would be increased from 75% to 125%. The process of release of this Government Regulation [PP] had to pass through complicated bureaucracy in some related Ministries encompassed in the Regulation. The PPnBM had to pass the Ministry of Industry, Ministry of Law and Human Rights and the State Secretariat [Stegned].

The regulations being part of the Government's Policy Package Part I had b be effective 3 times. Initially November 2013, then January 2014 and now April 2014. In terms of volume and value, import of luxurious cars was not too sizable so it only slightly reduced import value. So the contribution to deficit contraction process was little and so was the value in terms of state’s income.

However the Government must remain consistent about reducing import of consumer's product to improve budget structure and maintain healthy fiscal performance. The brighter side of it was that although the PPnBM tax was increased, the affluent society in Indonesia tend to keep buying luxurious cars. No matter how high the price they would still buy the cars, not because they needed them but because of sheer pleasure, prestige and social status.

There really rich group would still buy luxurious cars, although the Government increased taxes up to 200%. Of course there would predictably be sales downturn of luxurious cars because the prices soared high but such was in line with the objective to reduce consumption of imported luxurious cars and to better trade balance of the long term.

Business New - April 2, 2014

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