Government Restricts Import, Price of Luxury Cars Jumps

As US dollar appreciates against rupiah, the price of new cars also gradually climbs up. This seems to make some people reconsider their plans to own new cars, especially when they want to buy luxury cars that are completely built up (CBU), because lately these cars are categorized as luxury goods that are subject to increased Income Tax (PPh) Article 22.

The ongoing dollar appreciation against rupiah pushes the government to issue several policies to slow down the rise of dollar. They include tax adjustments to put a brake on imports and thus curb current account deficit.

For luxury goods such as luxury CBU cars, the government adjusts the tax by hiking the income tax from 7.5% to 10%. The government has decided on the increase of PPh Article 22 on 1,147 imported consumer goods.

Previously, the government through Finance Minister Sri Mulyani has stated that they were very cautious in drafting the import restriction policy. "We will cautiously use the best instruments we have, cautiously do it so that there will be no future problems," Sri Mulyani told (August 27).

Sri Mulyani also stated that the government had done a thorough study so that the implementation of the import restriction policy won't cause systemic impacts on the economy. The government also assured that the PPh Article 22 is imposed on consumer goods that do not give much additional value domestically but are recorded to be eroding foreign exchange income.

Of the 1,147 consumer goods on which the income tax hike is imposed on, 719 are categorized as goods used in consumption process and other purposes, including ceramics, tires, textile products, and electronics.

Meanwhile, 218 other goods are consumer goods that can already be produced domestically, for instance, shampoo, light bulbs, and cosmetics. Furthermore, 210 other goods are categorized as luxury goods.

Although enjoyed only by a certain segment – the upper middle class – the income tax hike on luxury goods seems to make people reconsider buying CBU cars. "Already more than 20% consumers are delaying buying imported CBU cars," claimed (September 13, 2018).

The rise in the price of luxury cars is not merely caused by the adjustment on PPh Article 22, but also by the imposition of single import duty of 50%, a change from the previous 10%-50%. The government also imposes luxury goods tax (PPnBM) between 10% and 125%.

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