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Livestock levy causes beef price rises: Minister
Where's the beef?: A farmer feeds his cattle in Tegal, Central Java, on April 9, 2013
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Where's the beef?: A farmer feeds his cattle in Tegal, Central Java, on April 9, 2013. The government has revoked a measure to impose value added tax (VAT) on imported cattle, less than a month after the regulation was issued, as a result of soaring beef prices in local markets. The policy was aimed at reducing cattle imports and at the same time boosting the local breeding industry. (Antara/Oky Lukmansyah) (VAT) on imported cattle, less than a month after the regulation was issued, as a result of soaring beef prices in local markets. The policy was aimed at reducing cattle imports and at the same time boosting the local breeding industry. (Antara/Oky Lukmansyah)
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span class="caption">Where's the beef?: A farmer feeds his cattle in Tegal, Central Java, on April 9, 2013. The government has revoked a measure to impose value added tax (VAT) on imported cattle, less than a month after the regulation was issued, as a result of soaring beef prices in local markets. The policy was aimed at reducing cattle imports and at the same time boosting the local breeding industry. (Antara/Oky Lukmansyah)
The tax on imported livestock issued late last year has contributed to the soaring cost of beef, leading to a policy revision, says Trade Minister Thomas Lembong.
Thomas said the Finance Ministry Regulation (PMK), which was sealed a day before New Year's Eve, was issued at the wrong moment as it imposed value added tax (VAT) during a supply shortage.
"The problem is the beef price is high and the supply has shrunk. Then, there is the additional 10 percent VAT. It was like adding insult to injury," he stated during a press conference in Jakarta on Tuesday.
Since Jan. 8 the VAT has been levied on all imported livestock including cattle, buffalo, poultry, sheep, goats, pigs, with the sole exception of breeding cows. As a result, the price of beef in local markets has soared from Rp 92,000 (US$6.60) to Rp 130,000 per kilogram.
Business groups were quick to voice their objections, saying that the policy contradicted the government's intention to slash beef prices. The protests have led to revisions of the tax policy, which are currently being processed by the Finance Ministry.
However, Thomas acknowledged that the VAT had a good objective, anticipating a shift from consumption-based industry to a production-based one because more local breeders would be encouraged to raise livestock while at the same time reducing cattle imports.
Thomas added that the soaring prices were a shared responsibility among the relevant ministries. "The Office of the Coordinating Political, Legal and Security Affairs Minister is also concerned about the soaring prices because of the social and security impacts," he said.
Thomas admitted that the Trade Ministry had to work hard to make a breakthrough to control food prices, especially in cutting the supply chain, which has been the main cause of the problem.
"The challenge has been there for the past 10 years," he said. (ags)
