Ford allegedly modified Everest SUVs from its Thai plant into 10-seat vehicles before importing them on the lower tax bracket for minibuses to Indonesia and then changed them back to their original seven-seat configuration. (JG Photo/Jurnasyanto Sukarno)

Govt to Look Into Tax Avoidance Allegation Against Ford Indonesia


SEPTEMBER 14, 2016

Jakarta. The government is looking into allegation that Ford Motor Indonesia, the local unit of United States car maker Ford Motor Company, might have deliberately tried to avoid import tax on its Everest sport utility vehicles from 2007 to 2014.

The allegation is the latest in a string of problems for Ford, which is facing the prospect of a $75 million dollar lawsuit from ex-local dealers after its shock decision to pull out from Indonesia in January citing its inability to compete with Japanese rivals.

According to media reports — which Ford has denied — the automaker allegedly modified Everest SUVs produced at its Thai plant into 10-seat vehicles before importing them to Indonesia and then changed them back to their original seven-seat configuration before selling them here.

By doing that, Ford was supposed to benefit from paying lower import tax. A 10-seat vehicle is classified as a minibus and subjected to a 10 percent regular sales tax, instead of the 40 percent sales tax on luxury goods (PPnBM) normally imposed on SUVs.

"We will take a closer look at it," Robert Leonard Marbun, the director of international custom at the Finance Ministry's director general of customs and excise, said on Wednesday (14/09).

Yustinus Prastowo, the executive director of the Center for Indonesian Taxation Analysis (CITA), said that if the allegations were proved to be correct, Ford would have to pay back taxes four times the original amount and its executives could face up to three years in jail.

Yustinus said the government should investigate the allegation seriously, as similar cases will cost the government an arm and and a leg in tax revenue. "This means the government's tax supervision regime is not optimal yet," Yustinus said.

Responding to the allegation, Ford Motor Indonesia communications director Lea Kartika Indra claimed while in Indonesia Ford had always adhered to the rules and policies of the Indonesian government, including obeying entry requirements for their products and paying all the import tax on their overseas-produced vehicles.

Ford, one of Detroit's "big three" automakers, entered the Indonesian market in 2002 and opened a manufacturing operation in a bid to carve out a piece of Indonesia's huge yet immature car market that has long been dominated by Japanese producers like Toyota, Honda and Daihatsu.

But the US car maker only managed to acquire less than 1 percent of the total automobile market share in Indonesia in 14 years, and in January it announced the end of its manufacturing operation in Indonesia, shedding at least 500 jobs.

In June this year, six car dealers who own a total of 31 local Ford outlets threatened to file a lawsuit demanding Rp 1.1 trillion ($75 million) in compensation from Ford Motor Indonesia, Ford Motor Company and Ford International Service, for losses from the company's untimely decision to leave the country.

Under their existing contracts, that have yet to be amended, the dealers are obliged to take care of the aftersales services for Ford cars, but they are not allowed to import or sell any new vehicle.