Luxury sales tax on electronics goods to be cut

Aditya Suharmoko ,  The Jakarta Post ,  Jakarta   |  Thu, 02/28/2008 11:29 AM  |  Headlines

To reduce the price of electronic goods in the country and to help stop rampant smuggling practices, an interministerial team has decided to cut luxury sales taxes on electronics.

"The 20 percent luxury sales tax imposed on electronic goods will be reduced to 10 percent, while the 10 percent tax imposed on the goods will be eliminated," the team's vice chairman Director General of Taxation Darmin Nasution said Wednesday.

But Darmin said not all electronic goods within the 10 percent tax category would be freed from the tax and that it would depend on the size of the product.

"Large electronic goods will still attract luxury sales tax," he said.

Currently, the government imposes a 20 percent luxury sales tax on 43-inch LCD televisions and a 10 percent tax on televisions less than 42-inches wide. It previously eliminated luxury sales tax on televisions between 14 and 21-inches wide.

PT Panasonic Gobel Indonesia president director Rachmat Gobel, also a vice chairman of the Indonesian Chamber of Commerce and Industry (Kadin), has repeatedly said the government should cut luxury sales tax on electronic goods to compete with black-market products entering the country.

Gobel also said eliminating luxury sales taxes would help curb the rising price of electronic goods, which was triggered by the rise in production costs.

Many people prefer to buy black-market products as they are much cheaper.

For example, an original Nokia E90 cell phone is sold at about Rp 10 million (US$1,098), but the black-market product can be sold 30 percent cheaper.

Currently, at least 40 percent of electronic goods sold in the country are smuggled.

Darmin said cutting the luxury sales tax would help bolster sales of locally manufactured electronic goods.

"If the government continues to impose luxury sales tax on electronic goods, locally manufactured products will be unable to compete against smuggled products," Darmin said.

"This is the main reason the government wants to cut the luxury sales tax."

But Darwin said the tax cut was not final and the industry must wait for a decision from the fiscal policy agency (BKF) at the Finance Ministry.

When asked about the directorate general's potential losses due to the cut of luxury sales tax, Darmin declined to answer on grounds the BKF had not made its decision.

"We will mention the figure when (the government) has come to a decision," he said.

Copyright © 2008 The Jakarta Post - PT Bina Media Tenggara. All Rights Reserved.