Proposed Smartphone Tax Would Cut Into GDP Growth, Study Cautions
Jakarta. The growing number of smartphone users in Indonesia is helping the country's economic growth, but the government's latest plan to impose new taxes on the devices threatens to reverse that trend, an industry watchdog has warned.
Smartphone usage now accounts for 5.5 percent of the country's gross domestic product, says Kristiono, the chairman of the Indonesia Telecommunication Society (Mastel), citing a joint study by Mastel and the University of Indonesia’s Institute for Economics and Social Research (LPEM-UI).
Every 1 percent increase in the number of smartphone users in Indonesia boosts the country's GDP by 0.055 percentage points through an increase in Internet traffic and online purchases, a study has found.
The same study also estimates that every smartphone user contributes Rp 1.73 million ($126) annually to the economy, or about 4 percent of GDP per capita of Rp 41.8 million in 2014.
"This study proves that the information technology and communications sector contributes significantly to our economic growth," Rudiantara, the communications minister, said in response to the release of the findings on Tuesday.
But Kristiono criticized the government's plan to impose a value-added tax on luxury items, which include smartphones, warning that it would lead to a decline in GDP of 0.25 percentage points.
The tax, which could amount to up to 75 percent of an item's retail value, also applies to actual luxury items such as sports cars, yachts and mansions.
"Considering the economic impact [of smartphones], the government should not undermine efforts to provide affordable smartphones," Kristiono said.
He noted that 84 percent of Indonesians polled in the study said they considered their smartphone a necessity rather than a luxury item.
The Finance Ministry previously said it was considering extending the luxury tax to smartphones in an effort to battle illegal imports. It has already waived the tax for other items such as electrical appliances, sports equipment and musical instruments.
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