Indonesia plans to extend tax breaks on two-wheel drive cars

JAKARTA (CNA) – Indonesia aims to extend a luxury tax break on the sale of sedans and two-wheel drive cars with engine power of less than 1,500cc to August to support its pandemic-hit automotive industry, the Industry Ministry said yesterday.

The tax was fully removed in March and was supposed to be re-imposed at 50 per cent from June. The 50-per-cent discount will now apply from August to December.

Industry Minister Agus Gumiwang Kartasasmita said the extension of the lifting of the tax was aimed at revitalising demand for a industry “that has consistently contributed significantly to the national economy”.

A spokesperson at the Finance Ministry said the plan was being discussed.

Car sales in Southeast Asia’s largest economy grew after the tax break was introduced in March after months of sluggish sales due to the pandemic but have yet to return to pre-
pandemic levels.

Motorists make their way through rush hour traffic in Jakarta, Indonesia. PHOTO: AP

Total sales in 2020 were just over 532,000 units, about half the previous year.

In April, the government introduced a 12.5-per-cent to 50-per-cent tax discount on the sale of four-wheel drives and cars with engine capacity of up to 2,500cc manufactured with at least 60 per cent domestically sourced components.

That discount is in effect until the end of 2021.

Indonesia’s car market is dominated by Japanese brands such as Toyota, Daihatsu, Mitsubishi and Honda.

Indonesia’s gross domestic product contracted for the first time since the 1998 Asian financial crisis last year, by 2.07 per cent with household consumption and investment declining.