Indonesia issues tax break on property sales targeting middle class

JAKARTA, March 1 (Reuters): Indonesia has issued a new tax break worth around $350 million applied to some property sales in a bid to boost consumer confidence and help support its pandemic-hit economy, government ministers said on Monday.

Starting this month until August, the government will remove a 10% value added tax for sales of houses priced below 2 billion rupiah (US$140,351) and charge only half of such a tax for sales of homes priced between 2 billion rupiah to 5 billion rupiah, Finance Minister Sri Mulyani Indrawati said a virtual news conference with other ministers.

The measure is part of a policy package designed with the central bank and other regulators and comes after authorities announced a cut in luxury tax on sales of some cars.

Bank Indonesia has already removed downpayment requirements for vehicle loans and mortgages, on top of interest rate cuts totalling 150 basis points.

"This is to optimise the purchasing power of the middle class ... and to boost confidence so they start to consume," Sri Mulyani said.

South-East Asia's largest economy fell into its first recession in more than two decades last year as the coronavirus pandemic dealt a blow to private consumption and investment.

Coordinating minister of economic affairs, Airlangga Hartarto, said the measures could boost economic growth by 0.9 to 1 percentage point. Authorities have targeted 5% growth this year, following a 2.07% gross domestic product contraction in 2020.

Sri Mulyani said the tax incentive for the real estate sector will cost the government 5 trillion rupiah ($350.88 million), while the previously announced tax break for car sales will cost 2.99 trillion rupiah.

The government has lifted its National Economic Recovery budget several times this year, with the latest figure at 699.43 trillion rupiah, almost twice the original allocation. - Reuters
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