T

he government has decided to revise its tax policy on livestock in the face of mounting protests from business groups.

Astera Primanto Bhakti, a Finance Ministry expert on state revenue policy, said on Friday that the ministry was in the process of revising Finance Minister Regulation (PMK) No. 267/PMK.010/2015.

'€œAll types of livestock are now free from value-added tax, as previously. It is effective starting Jan. 8, as stipulated in the existing regulation,'€ he said when contacted by phone on Friday.

'€œ[The revision] aims at synergizing policies on strategic goods in the food sector,'€ he added.

The decision came one day after the Finance Ministry said that it was open to input from the public regarding the controversial policy, which imposed 10 percent VAT on livestock, with the sole exception of breeding cattle.

Primanto previously said that the regulation was a follow-up to Government Regulation (PP) No. 81/2015 on imports and strategic taxable goods exempted from VAT.

The earlier regulation includes '€œlivestock'€ on its list of strategic goods exempted from VAT, but says that further details on the livestock criteria will be regulated by a separate finance minister regulation.

When issued, only breeding cattle were exempted, however.

'€œThe decision to exempt only breeding cattle from VAT was made on the advice of the Agriculture Ministry to boost the competitiveness of the domestic cattle industry,'€ Primanto said on Thursday during a media briefing.

The government also claimed that procurement of breeding cattle would as such be more affordable, thus supporting domestic breeders.

Primanto also played down the effect of the tax on inflation, saying that beef consumption, while rising, still accounted for only a minor proportion of total food consumption.

However, business groups were quick to voice their objections, arguing that the imposition of VAT on all other types of livestock '€” such as ready-to-slaughter cows '€” would backfire.

Joni Liano, the executive director of the Indonesian Beef Producer and Lot Feeder Association (Apfindo), said that the policy contradicted the government'€™s own stated intention to bring down beef prices.

'€œIt'€™s true that breeder cattle are exempted from the tax, but all other livestock are not. The tax would certainly add costs and increase beef prices at the consumer level,'€ he said.

According to Joni, were the tax imposed, it would be cheaper to buy imported beef than locally produced beef.

Meanwhile, Cow and Buffalo Breeders Association (PPSKI) chair Teguh Boediyana said that the policy would have been detrimental to micro- and small-scale businesses as well.

He pointed to the countless small food vendors across the country that would have had to bear higher costs and potentially see business slowdown.

'€œWhat if they couldn'€™t pass the extra costs onto the consumers? It would be difficult at a time like now, when prices are already high,'€ he said.

Separately, Coordinating Economic Minister Darmin Nasution said he had asked the Finance Ministry to revise the policy, as it would have a detrimental impact on strategic food prices.