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NEWS UPDATES 19 October 2009

New Indonesian tax law threatens car sales

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The newly passed law authorizing city and regional administrations to set vehicle tax rates on a progressive basis will cause car sales to drop in 2010, representatives of Daihatsu and Isuzu, both grouped under Astra International, were quoted by the Jakarta Post saying over the weekend.

In August, lawmakers passed a new law on regional taxes and levies setting new vehicle tax regulations, stating that car owners have to pay more tax for each additional private motor vehicle owned.

The maximum tax rate for a single owner is 10 percent.

Yohannus Nangoi, vice president of Isuzu’s sole distributor in Indonesia, PT Isuzu Astra Motor Indonesia, said the law might hamper Isuzu’s high expectations for 2010 car sales.

“Actually we have a pretty optimistic target for next year’s sales. We expect to sell 18,000 cars in 2010, 3,000 more cars than this year’s 15,000 car sales estimate.

“But the new tax law will be ‘dangerous’ for the target,” he said during a seminar in Bandung.

Yohannus, however, failed to disclose how much the law could affect car sales. “We haven’t calculated that yet, as the progressive tax rate will differ in each region,” he said.

The law covers 16 regional taxes, five provincial and 11 city administrations.

Gaikindo data shows car sales hit 252,130 units in the January-July period of this year, down by 28.7 percent from the 353,500 units in the corresponding period of 2008.

The car sales figure is expected to hit 460,000 units by the end of this year, a 24.32 percent drop from the 607,805 units recorded last year. Without taking into account the new progressive tax scheme, it is hoped 550,000 cars will be sold next year.

The government is hoping that the progressive tax can help ease the overwhelming number of cars congesting streets of Indonesia’s big cities like Jakarta.


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