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Indonesia imposes 20% tax on cell phones

Publication Date : 08-04-2014


Indonesia's Industry and Trade Ministries have agreed to charge a 20-per cent luxury goods sales tax on cell phones to foster growth in the domestic infant industry.

The new tax will affect the majority of cell phones sold nationwide, not limited to those priced above 5 million rupiah (US$442.28) as earlier indicated, according to Industry Minister MS Hidayat.

“This will serve as an incentive, giving the opportunity for our industry in its initial phase to grow,” Hidayat said.

He added there were four domestic cell phone makers, but refused to identify them.

Currently, there are cell phone makers manufacturing their products locally with imported components.

PT Hartono Istana Teknologi, the producer of consumer electronics under the Polytron brand, for instance, is developing cell phones under its own brand, including smartphones.

Indonesia, Southeast Asia’s largest economy with more than 240 million inhabitants, has emerged as one of the world’s biggest and most promising cell phone markets.

As of 2012, the number of subscriber identification module (SIM) cards sold nationwide exceeded 120 per cent of the total population.

Trade Minister Muhammad Lutfi expressed a similar view with that of Hidayat, saying that the 20 per cent tax would encourage the development of the local cell phone industry.

“We are treating cell phones similar to luxury goods, and with the tax we are allowing the domestic industry to expand,” he said after a meeting with the industry minister.

Distributors and importers of cell phones hold varied opinions over the government’s plan to place the 20 per cent tariff on smartphones.

The Cell Phone Dealers and Importers Association (Aspiteg) backs the plan, saying that the measure will help accelerate the development of the domestic cell phone industry by attracting investment.

On the other hand, major cell phone distributors fear that the significant price gap caused by the tax will endorse smuggling from neighboring countries.

In response to this issue, Indonesian Chamber of Commerce and Industry (Kadin) deputy chairman for monetary, fiscal and public policies Hariyadi Sukamdani said the tax would be ineffective in pulling investment and would instead largely intensify smuggling, which until now had remained a main concern for manufacturers to invest here.

“Our huge domestic market alone should have been a key incentive for overseas manufacturers to invest in cell phone making facilities. With additional fiscal and non-fiscal incentives, there will be more interest for producers to pour their investments here,” Hariyadi said, adding that Indonesia could also explore the possibility of becoming a regional production base to serve the Southeast Asian market.

Taiwan-based Foxconn Technology Group, the world’s largest electronics manufacturer, has expressed its intention to build plants in Indonesia beginning this year. However, the plan is still hampered by the unavailability of land where the facilities will be built as demanded by Foxconn.


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