The Discourse on 0 Percent Car Tax Relaxation Turns Out to Be Just a Hoax
The proposal for a 0 percent car tax relaxation from the Ministry of Industry (Kemenperin) seems to be a breath of fresh air for the automotive industry in the country. This policy is predicted to boost the automotive industry that has been sluggish due to the Covid-19 pandemic.
The 0 percent car tax relaxation is a stimulus from the government to eliminate several taxes on the latest car models. The taxes that are planned to be eliminated down to zero percent include Value Added Tax (VAT), Luxury Goods Tax (LGT), Motor Vehicle Name Transfer Fee (BBNKB), and Motor Vehicle Tax (PKB).
If these taxes are removed, the price of new cars in the market could potentially be cheaper by 40 percent. For example, the latest Daihatsu Xenia R is priced between IDR 203 million - IDR 238 million. If the 0 percent tax relaxation is realized, the price would become IDR 121 million - IDR 142 million.
The 0 percent car tax relaxation is also expected to encourage car sales in the fourth quarter of 2020 and save the automotive industry ecosystem in Indonesia. It is important to note that the automotive industry in the country is like a locomotive business sector with a long train of supporting industries.
If there is support from the government for the automotive industry, it can directly boost economic recovery in component factories from tier one to tier four and other supporting industries.
Car tax relaxation could open 1 million job vacancies
Another impact of the 0 percent car tax relaxation is the opening of one million job vacancies. This is closely related to the suboptimal productivity of the automotive industry in the country.
Based on collected data, so far, car factories in Indonesia can only produce 1.3 million units per year. This figure has not yet reached the production capacity, which could actually be up to 2.4 million units.
The Secretary-General of the Indonesian Automotive Industry Association (Gaikindo), Kukuh Kumara, stated that considering the automotive sector requires many other supporting industries, from component factories to banking and insurance, the 0 percent car tax relaxation could create one million job vacancies.
"If there is a tax relaxation, we hope that within a certain period, not forever, there will be tax relaxation, but for a certain period to recover or to accelerate or let’s say relaxation as a catalyst to speed up the recovery of our automotive industry. So that this also becomes part of our national economic recovery," he said in an interview with CNBC Indonesia recently.
The impact of the 0 percent tax relaxation also does not only refer to the improvement of the domestic automotive market but could also increase export indications to foreign countries.
Consumer trends hold off car purchases, interest in used cars plummets
Entering the fourth quarter of 2020, the discourse on the 0 percent car tax relaxation is widely heard. The impact of this has led to several new trends, namely consumers are holding off on purchasing cars at dealerships.
Based on collected data, car sales in September 2020 recorded a significant sales gap between factories and dealers and from dealers to consumers. The gap amounted to 5,192 units. This figure occurred because many consumers held off on purchasing cars even though they had pre-ordered previously.
There are thousands of unsold cars due to the 0 percent tax discourse that has yet to be finalized until mid-October 2020. This is seen as causing Indonesia to lose the potential to improve the sluggish automotive market due to the pandemic.
The Secretary-General of the Indonesian Automotive Industry Association (Gaikindo), Kukuh Kumara, mentioned that actually, consumer purchasing power still exists. This can be proven by data showing that car sales from factories to dealers increased by 30 percent. This figure is also the highest record since the pandemic hit the country for 7 months.
"However, this is still very far below the previous normal condition where every month around 90,000 to 100,000 units could be sold," he explained.
Kukuh stated that actually, consumer purchasing power still exists. However, due to the PSBB and the discourse that has not yet been approved, it has also had an impact. The most evident is that potential consumers are holding back until the discourse is realized.
Moreover, there are other impacts that, although not yet finalized, are already being felt, namely the interest in used cars has plummeted. The lack of clarity regarding policies aimed at boosting the Indonesian automotive market has already affected the buying and selling of four-wheeled vehicles, both new and used.
Senior Marketing Manager of the Used Car Market, WTC Mangga Dua, revealed that since the emergence of the tax relaxation discourse, many consumers have canceled their purchases of used cars.
"Not only new cars, but used cars are also significantly affected by this discourse. Many consumers have postponed buying cars," said Herjanto to Kompas.com in Jakarta.
This decline is quite felt by used car dealers. The used car market has become sluggish because many are postponing buying used cars.
Proposal rejected by the Minister of Finance, 0 percent car tax relaxation is just a false hope!
The 0 percent car tax relaxation turns out to be just a false hope. The stimulus that automotive industry players hoped would boost sales was rejected by the Minister of Finance of the Republic of Indonesia, Sri Mulyani, on October 19, 2020.
In fact, the proposal came from the Minister of Industry, Agus Gumiwang, which was then supported by industry players because it was considered capable of reviving the automotive market severely affected by the Covid-19 pandemic.
In a press conference on the State Budget, October 19, 2020, Sri Mulyani rejected the proposal for a 0 percent car tax this year. The reason is that tax incentives for the industry want to be provided broadly and evenly, not just for one sector.
"We are not considering at this time to provide a 0 percent tax on new cars as conveyed by the industry and the Ministry of Industry," said Sri Mulyani.
The woman, commonly called Ani, also added that tax incentives for industries during the pandemic should be provided evenly, where one policy can help many industrial sectors at once. Then, she also claimed that the government has provided several incentives that are also suitable for the automotive industry.
"We will continue to try to provide support to the entire industrial sector through the incentives that we have provided," she concluded.
Writer: Dinno Baskoro
