Electronics firms demand elimination of luxury tax

Aditya Suharmoko ,  The Jakarta Post ,  Jakarta   |  Sat, 05/24/2008 12:23 PM  |  Business

Electronic producers have demanded the government expedite the elimination of the luxury tax on their goods to cushion the impact of increased fuel prices on sales.

"With the fuel prices hike, the price of raw materials will increase, pushing producers to raise the price of electronics by between 5 and 10 percent," Indonesian Electronic Producers Association (Gabel) chairman Rachmat Gobel said Friday.

The government announced Friday it would raise fuel prices by an average of 28.7 percent. The per-liter price of Premium gasoline increased from Rp 4,500 (48.4 US cents) to Rp 6,000, diesel from Rp 4,300 to Rp 5,500 and kerosene from Rp 2,000 to Rp 2,500.

Gobel, also president director of PT Panasonic Gobel Indonesia, said the elimination of the luxury tax would compensate for the rising price of raw materials triggered by the rise in fuel prices.

The government's Tariff Team -- comprising the Industry Ministry, the Trade Ministry and the Finance Ministry -- agreed February to scrap the tax and have since submitted a proposal to be discussed by the Finance Ministry's directorate general of the taxation and fiscal policy department.

Electronic producers have increased the price of their products by a maximum 10 percent this year due to the rises in global oil prices, according to the Electronic Marketer Club (EMC).

On Friday, oil was traded at less than $132 per barrel after soaring past $135 per barrel a day before, AFP reported. Oil prices reached an all-time high of $135.14 per barrel in London and $135.09 in New York.

The EMC also said last week if fuel prices increased by an average of 30 percent, it would revise down its sales target growth from 20 to 5 percent.

Gobel also said the government should carefully monitor the increasing number of black market electronic products entering Indonesia.

"I know the Finance Ministry's directorate general of customs and excise has striven to do its job well in combating electronic smuggling. However, Indonesia has a large market and its geography makes it easy to penetrate," said Gobel.

With the fuel prices hike, Gobel said the electronic industry's growth would not exceed this year the 10 percent growth recorded in 2007, as "people will focus on buying primary goods, such as foods".

The Industry Ministry has estimated all industries will grow by a maximum 5 percent this year.

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