JAKARTA (Xinhua): The Indonesian government has extended the tax discount or the sales tax on government-borne luxury goods, locally known as PPnBM, by 100 per cent for motorised vehicles as an effort to spur consumption of the middle class amid the pandemic.
The tax discount for motor vehicles, which was formerly given from March to August 2021, was extended to December 2021, Head of the Fiscal Policy Agency of the Ministry of Finance, Febrio Kacaribu, said in a statement on Friday (Sept 17).
The 100 per cent tax discount was extended for 4x2 (two-wheel drive/2wd) passenger cars with an engine capacity of up to 1,500 cc. Meanwhile, the 50 per cent tax discount was for 4x2 (2wd) passenger cars with the capacity of more than 1,500 cc to 2,500 cc, and 25 percent tax discount was given to 4x4 (4wd) vehicles with the capacity of more than 1,500 cc to 2,500 cc.
The excess of PPnBM on the purchase of motorised vehicles in September 2021 will be returned by the taxable companies that make the tax collection, Kacaribu said.
Cumulatively from January to July 2021, retail car sales grew by 38.5 per cent compared to the same period last year, showing a positive trend as a result of the policy on tax discounts, he added.
"With the increase in sales, motor vehicle manufacturers can resume operations with higher capacities," he said.
The car production from January to July 2021 was able to grow 49.4 per cent year-on-year (yoy) so that it was not only able to meet domestic needs but also exports of Completely Knocked Down (CKD) vehicles which grew 169.7 per cent in the same period, he said.
Industry Minister Agus Gumiwang Kartasasmita said that there would be additional 2.2 trillion rupiahs (about US$155.6mil) in tax revenue from the 100 per cent discount policy on the government-borne luxury goods sales for motorised vehicles until the end of 2021.
"We project additional 2.22 trillion rupiahs (about $155.6mil) in tax revenue with the increase in car sales supported by the policy," the minister said in a statement on Friday.
According to him, based on the ministry's analysis, the extension of the tax discount until December 2021 was projected to increase vehicle sales by 35,553 units.
Kartasasmita pointed out that the extension of the tax discount was also considered to have accelerated the recovery of the automotive industry, as well as increased state revenues.
The minister added that the growth of the manufacturing sector in the second quarter was driven by the fast growth of the automotive industry which reached 45.7 per cent.
In addition, data on sales of four-wheeled vehicles under 1,500 cc in the January-August 2021 period was recorded at 175,000 units. This figure shows an increase of 51.0 per cent year-on-year compared to the same period in 2020.
The sales of cars above 1,500 cc in the January-August 2021 period reached 44,680 units, an increase of 64.4 per cent compared to the same period last year, he noted.
With the extension of the policy, the minister hoped that Purchasing Manager's Index (PMI) of the Indonesian manufacturing sector could return to an expansive path or be above 50 as happened for eight consecutive months from November 2020 to June 2021.
"With the industry being expansive and optimistic about carrying out its activities, we estimate that industrial growth in the third quarter of 2021 could be even better," said the minister.
The increase in car sales due to the extended tax discount would also play a role in creating a large multiplier effect, he said, adding that the increase in vehicle orders would have a positive impact on the component industry that supports the automotive industry.
Legislator Mukhtarudin appreciated the government's measure in extending the 100 per cent discount on the sales of luxury goods borne by the government for motorised vehicles until the end of 2021.
"The domino effect of this previous policy was quite significant for the economy of the nation and the state. And the government's decision is right to extend the policy again," Mukhtarudin said in a statement on Saturday.
The decision is very relevant in the midst of the positive trend created in the automotive industry, he said, adding that the Ministry of Industry also deserves appreciation for the extended tax discount as this is its initiative to make the policy possible.
Previously, the Industry Minister sent a letter to the Finance Minister regarding the proposed extension of the tax discount for September to December 2021.
Mukhtarudin added that the policy would give benefits not only to the industrial sector but also to the supporting industrial sector.