The Indonesian government plans to exclude sedan from the luxury goods category, effectively lowering the tax on the car model and helping carmakers set up local sedan manufacturing. (JG Photo/Safir Makki)

Gov't Plans to Scrap Luxury Tax for Sedans

JULY 22, 2017

Jakarta. The Indonesian government plans to exclude sedan from the luxury goods category, effectively lowering the tax on the car model and helping carmakers set up local sedan manufacturing, Industry Minister Airlangga Hartarto said on Friday (21/07).

"Regulations have categorized sedan as a luxury item for decades. But that is not the case anymore today," Airlangga said.

According to the minister, the sedan tax should be lowered to 10 percent, or equal to the tax on special utility vehicle (SUV) or multi-purpose vehicle (MPV).

All sedans sold in Indonesia are subjected to a 30 percent sales tax. The tax is waived if the car is sold overseas.

Indonesia's Car Manufacturers Association (Gaikindo) has been persuading the government to lower the sales tax on sedan to make it more attractive for global car manufacturers to invest in local sedan makers.

A small domestic market for the sedans — less than 5 percent of total sales — hardly justifies the likes of Toyota or Honda to expand their sedan plant here, Gaikindo said.

Airlangga seems to agree with the view, saying he expects a lower sedan tax will help Indonesia turn itself into a new sedan manufacturing center in Asia.

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