Minister Sri Mulyani Increases Luxury Car Tax to 190 Percent

TEMPO.CO, Jakarta - The Government has officially announced the newly adjusted import income tax (PPh) on 1,147 consumption commodities as of Wednesday, September 5.

Commodities affected by the new PPh 22 tariff are luxury items, which include completely built up (CBU) luxury cars and motorcycles. The PPh 22 was initially designed to impose 2.5 percent to 7.5 percent but is officially set at 10 percent.

Finance Minister Sri Mulyani Indrawati argued that the policy had to be enforced to maintain Indonesia’s trade balance from further deficits in the midst of a global economic uncertainty. Especially considering that imported luxury vehicles have significantly contributed to the rise of the current trade balance deficit with an import value of USD 87.88 million in January-August of 2018.

“In the midst of a situation like we are experiencing right now, luxury cars are luxury items that have no importance for this republic. The total value of its imports reached USD 98.99 million in January-August of 2018,” Sri Mulyani explained yesterday.

Upon the adjustment of the PPh 22, the government will still impose a 10-125 percent luxury goods tax (PPnBM) added with a 10 percent value-added tax (PPN). Import Duty Tax will also be 50 percent flat. After the increased PPh 22 and the additional taxes, the total tax that will be imposed amounts to 195 percent.

The Indonesian government hopes that imposing high taxes will reduce imports since it will practically increase the price of a luxury item three folds. “[Luxury car consumers] will have to pay roughly 190 percent from the original sticker price,” said Minister Sri Mulyani.

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