House endorses bill on VAT, luxury tax

The House of Representatives endorsed a bill on value added tax and luxury tax Wednesday in an effort to provide legal certainties and raise competitiveness to boost investment in the country.

The law on value added tax and luxury tax is expected to be effective starting on Apr. 1, 2010, as the government will need to harmonize the law with existing regulations, Finance Minister Sri Mulyani Indrawati said before the House.

"Considering the time needed to prepare regulations to implement the law, to perfect system and procedure, as well as to familiarize (the law) both internally and externally, the law on value added tax and luxury tax will be effective starting on Apr. 1, 2010," she said.

Key points in the newly endorsed law include tax refund for foreign tourists, tax exemption for staple foodstuffs, such as fresh meat and fresh eggs, and a ceiling rate of up to 200 percent for luxury tax.

"The government truly realizes the changes mentioned above are needed to create a better and more competitive economy in medium- and long-terms," said Mulyani.