Income Tax on Imported Goods Raised to 7.5% to Limit Indonesian Imports
In order to improve the country's trade balance (particularly to curb the large current account deficit), the government of Indonesia will raise income tax on imported products through the issuance of a new ministerial regulation (issued by the Finance Ministry). Currently, there are two income tax tariffs on imported goods (see below). According to Finance Minister Chatib Basri, goods that will fall under the new regulation are consumption goods (except for food products). The new income tax tariff is expected to be implemented next week.
Currently there are two income tax tariffs for Indonesian companies that import goods. Those companies that have received an importer identification number (API, Angka Pengenal Importir) from the Trade Ministry have to pay income tax (over the imported goods) of 2.5 percent, while the income tax for those companies that do not have an API is 7.5 percent. As such, API holders received a tax break. Now, however, the new ministerial regulation will neutralize this difference by setting the tax at 7.5 percent for all importing companies. Thus, the new rule only affects those companies that have an API.
Indonesia's current account deficit eased to USD $8.4 billion (equivalent to 3.8 percent of GDP) in the third quarter of 2013 from USD $9.8 billion (4.4 percent of GDP) in the previous quarter. The large trade deficit of Indonesia has been a concern for most investors.
Next week, the government will provide more information about the new income tax on imported products.