Indonesia Cuts Import Duty Exemption to USD $75 per Day
Those who enjoy shopping for foreign products - for example online - that need to be imported into Indonesia will possibly have to face higher prices starting from 10 October 2018 as the Indonesian government decided to lower the import duty exemption ceiling from USD $100 to USD $75 per day, per buyer.
Through Finance Ministry Regulation No 112/2018, which was signed by Indonesian Finance Minister Sri Mulyani Indrawati on 10 September 2018, Indonesia will lower the ceiling on the the import duty exemption from USD $100 to USD $75 per day, per buyer. The regulation will come into effect on 10 October 2018.
In essence it means that import tax and import duties kick in when an individual or company - located in Indonesia - orders foreign products that (combined) cost more than USD $75 (including shipping costs) per day, per buyer.
For example, many middle class Indonesians order watches, bags or sunglasses from Singapore (especially as big international e-commerce platforms have made it easy to order goods from abroad). Provided the total price (price of the product plus shipping costs) is below USD $100, then it is exempted from import tax and duties.
However, as the Indonesian government is eager to discourage imports (to improve the current account balance and strengthen the rupiah exchange rate), while aiming to boost state revenue (particularly through taxes), it decided to cut the import duty exemption to USD $75.
Heru Pambudi, Director General of the Finance Ministry's Directorate General of Customs and Excise, said the ceiling at USD $75 is actually recommended by the World Customs Organization (WCO). He added that it can involve multiple purchases. For example, if an individual buys three items for a price of USD $20, USD $50 and USD $100 within one day, then the first two will be exempted from import duties and tax, while the third purchase will need to comply with the normal tariffs.
The lower ceiling is also a strategy to combat "naughty" importers who deliberately separate specific orders to avoid import tax and duties.
Meanwhile, Yustinus Prastowo, Executive Director of the Center for Indonesian Taxation Analysis, said the new ceiling is appropriate to combat the huge inflow of e-commerce products into Indonesia. However, the negative implication of the new ceiling is that, for example, when someone wants to order a book from abroad that is priced USD $75, he may decide not to purchase the book. This can impact negatively on education in Indonesia, Prastowo added.
Indonesia has among the most draconian import duties in the world, with the value of taxes and duties often equaling the price of the product itself.
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