Indonesia plans to extend tax breaks on two-wheel drive cars

JAKARTA, June 13 (Reuters): Indonesia aims to extend a luxury tax break on the sale of sedans and two-wheel drive cars with engine power of less than 1,500 cc to August to support its pandemic-hit automotive industry, the industry ministry said on Sunday.

The tax was fully removed in March and was supposed to be re-imposed at 50% from June. The 50% discount will now apply from August to December.

Industry Minister Agus Gumiwang Kartasasmita said the extension of the lifting of the tax was aimed at revitalising demand for a industry "that has consistently contributed significantly to the national economy".

A spokesperson at the Finance Ministry said the plan was being discussed.

Car sales in South-East Asia's largest economy grew after the tax break was introduced in March after months of sluggish sales due to the pandemic but have yet to return to pre-pandemic levels.

Total sales in 2020 were just over 532,000 units, about half the previous year.

In April, the government introduced a 12.5%-50% tax discount on the sale of four-wheel drives and cars with engine capacity of up to 2,500 cc manufactured with at least 60% domestically sourced components.

That discount is in effect until the end of 2021.

Indonesia's car market is dominated by Japanese brands such as Toyota, Daihatsu , Mitsubishi and Honda.

Indonesia's gross domestic product contracted for the first time since the 1998 Asian financial crisis last year, by 2.07% with household consumption and investment declining. - Reuters
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