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Tax cut for new cars expanded to include bigger models
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Illustration of cars for sale (Shutterstock/Mikbiz)
T
he government has expanded its temporary luxury tax (PPnBM) cut for new cars to include those with engine capacities of up to 2,500 cc starting on April 1 to boost consumer spending and accelerate the automotive sector’s recovery.
Finance Ministry Regulation No. 31/2021 expands the tax incentive to two-wheel-drive (2WD) vehicles and four-wheel-drive (4WD) vehicles with engine capacities between 1,500cc and 2,500cc.
The ministry previously issued a regulation that granted a PPnBM cut for sedans and 2WD vehicles below 1,500 cc starting March 1.
Read also: Tax cuts for new cars, houses come into effect
“The government hopes that this policy will be able to stimulate public consumption, especially for the domestic vehicle industry. This initiative is important in order to continue accelerating the national economic recovery rhythm,” Finance Minister Sri Mulyani Indrawati said in a press statement on Thursday.
The new regulation grants 2WD car buyers a 50 percent tax cut from April to August and a 25 percent cut from September to December. Meanwhile, 4WD car buyers could get a 25 percent tax cut and 12.5 percent cut during the same time periods.
The government expanded the tax cut to spur spending among Indonesia’s middle-class and upper-class citizens that commonly buy cars in the 1,500cc to 2,500cc range. Such citizens, whose finances are less affected by the pandemic than those of lower income citizens, have been accumulating liquidity in banks since last year.
