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AKARTA: The Finance Ministry is one step closer to issuing tax incentives for manufacturers of “green cars” after the proposal received unanimous backing from the House of Representatives.

“There’s no reason to reject this idea,” Emir Moeis, chairman of House Commission XI overseeing finance, said during a meeting with top officials from the Finance Ministry and Industry Ministry in Jakarta on Monday.

During the meeting, the interim head of the Finance Ministry’s fiscal agency, Bambang Brodjonegoro, briefed lawmakers on his plan to provide tax incentives for automotive companies manufacturing low-emission cars, in his bid to reduce the country’s fuel consumption in the long-run.

Under the new tax scheme, cars that can pass the requirements of “low-cost green cars” will have a tax rate of zero percent, meaning companies manufacturing them are free from the obligation to pay the product’s tax, which currently ranges between 10 and 20 percent.

The government defines a low-cost green car as having an engine capacity of less than 1,200 cc, minimum fuel consumption of 20 kilometers per liter and an affordable price, among other classifications.

Potential losses from the tax cut might top Rp 760 billion (US$79 million), according to Bambang. However, such losses would be compensated by the 12.5 percent of surge in investment in the automotive industry and additional employment in the sector, which will boost Indonesia’s economic growth by 0.2 to 0.3 percent, he added.

Bambang said that the new government regulation would be introduced within the next 30 days.