The Indonesian Government is set to limit imported items that are profusely filling the domestic market under a fiscal policy mechanism. This strategy is hoped to help improve the country’s trade balance and reduce the pressure from the predictably widened current account balance.
“We have identified the items in question and we are reviewing at least 900 imported commodities,” said Finance Minister Sri Mulyani Indrawati in Jakarta today.
The instrument that the government plans to use is an increased Article 22 income tax rate for imported goods. The current imported goods are taxed from 2.5 percent up to 7.5 percent based on its type and classification.
The Indonesian government will take into consideration several elements such as the availability of the item’s substitute product. If an item can be produced domestically than the tariff of a similar imported item will be valued higher.
Trade Minister Enggartiasto Lukita confirmed that the policy that will be imposed will not have negative effects on the country’s foreign-trade relations. “We will maintain existing policies and deals which will not disrupt investments,” said the Minister.
However, Chairman of the Indonesian Exporters Association (GPEI) Benny Soetrisno said that businesses in the private sector have yet received the complete list of 900 items that would be affected by the new policy.
“We advise the government to avoid limiting raw imported materials that can be further processed into a final product. Especially the ones that we do not produce or have very limited production capacity. One reason we import is to further process the items to be later exported,” said the GPEI Chairman.