Tax hike for vehicle owners

The Jakarta Administration has confirmed it will put a new progressive vehicle taxation system into effect next year in the effort to address traffic congestion, although critics deem this change as insignificant.

The new system will allow the administration to impose vehicle tax progressively, from 1 up to 4 percent of the vehicle value for each additional private motor vehicle owned.

“The city council has approved the bill for the regional regulation,” city tax agency’s regulatory division head Arif Susilo said Wednesday.

Arif said that with the new tax regulation, the city expects that citizens will think twice before purchasing more than one vehicle.

Once the law takes effect, provincial administrations can impose a 1 percent tax of the vehicle value and apply higher taxes on the second and following vehicles owned by an individual.

Arif said that the tax percentage was lower than that allowed by 2009 Law on Regional Tax and Retribution, which states a maximum of 10 percent tax in the progressive scheme.

“Each region has authority to set the percentage according to their need,” he did not elaborate.

Tax agency data shows that there are up to 5 million vehicles registered at the Jakarta Administration.

The city was targeting to levy the multiple vehicle ownership tax from between 10 and 20 percent of the total number of vehicle owners.

The latest data showed that there were already more vehicles than the city population, with 11.3 motor vehicles, compared to a 9.6 million population.

Critics slammed that the progressive tax would have little if any positive effect on the city’s chronic congestion problems.

Jachrizal Sumabrata, a sustainable urban transport expert of the University of Indonesia, told The Jakarta Post on Wednesday that there was no direct connection between the citizens’ mobility with the vehicle ownership.

“The fact that a person owns two or three cars and pays more taxes will not affect their perceived need to use the vehicles on the street,” Sumabrata said.

He also said that with such little tax percentage, the new system would be nothing but a new way for the administration to generate more revenue.

Contacted separately, Darmaningtyas, director of the Institute of Transportation Studies (Instran), said he also doubted that the progressive tax would be of any use with such a small percentage.

“They should’ve set it at 10 percent or more,” he told the Post.

Darmaningtyas said that the city administration should go all the way to discourage citizens from using private vehicles as the main mode of transportation.

“The administration should set high prices of fuel, parking fees and taxes; doing this while improving public transportation service,” he said.

Jakarta is facing the grim prediction that there will be about 12 million privately owned vehicles clogging the capital’s roads by 2011 and a total gridlock by 2014 as up to 1,500 new motorcycles and more than 500 new cars are on the city streets each day.