Indonesia to give tax incentives to green cars production

Jakarta — Indonesian government has prepared tax incentives aimed at boosting production of low cost green cars (LCGC) in the country.

Speaking in a hearing session with legislators of commission XI overseeing government policies in finance, banking and development planning in parliament on Monday, Indonesian Finance Minister Agus Martowardoyo said that his ministry and industrial ministry have teamed up to mapping out incentives aimed at attracting investors in producing LCGC cars in the country.

“Incentives would be provided in reduction of luxury goods tax (PPn BM) in each purchase of the car,” the minister said in the hearing.

According to the minister, the PPn BM tax cut provided by the ministry varies from 25 to 50 percent for the purchase of LCGC cars complying with requirements set by the industry ministry.

“Fifty percent tax cut would be provided for LCGC that is capable to run 28 kilometers for each liter of fuel. Meanwhile, 25 percent tax reduction is provided for cars that run 20 kilometer per liter,” the minister said adding that the incentives apply for cars using non-subsidized fuel.

Budi Darmadi, director general for prime and high technology products at the industry ministry said that LGCG car production should be in forms of cars with engine capacities ranging from 1, 000 to 1,500 cc and fuel-saving technologies.

According to Darmadi, the incentive would only be applied to cars fully produced in the country. He added that those cars are required to use domestic brand, and are fully designed by domestic engineers. In the first two years of their operation, they would be allowed to assemble cars whose components are imported from foreign countries. In the third year, the production is required to be fully carried out in the country.

He said the LCGC industry would contribute up to 12.5 percent to the nation’s industry, adding up to 8 percent to the workforce employed in automotive sector, 0.25 percent to overall investment in the country, and up to 0.3 percent to the country’s growth.[]


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