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Indonesia reinstates temporary tax break for small-car sales By Reuters

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© Reuters. FILEPHOTO: A Daihatsu Ayla customer inspects a car in a Daihatsu showroom. Jakarta 11/11/2014. REUTERS/Beawiharta (INDONESIA – Tags: TRANSPORT BUSINESS)

JAKARTA (Reuters) – Indonesia has reinstated a temporary luxury-tax break on sales of smaller cars as the concession helped boost demand for vehicles, the finance ministry said on Friday.

In a statement, the ministry stated that the tax break which was expired in August will still be in effect until the end.

Japan’s largest car manufacturer, Toyota, Daihatsu and Mitsubishi are the dominant brands in Indonesia.

Astra International is Indonesia’s largest car distributor. Indomobil Sukses Internasional is Indonesia’s second-largest.

Luxurious tax exemption will apply to sedans, two-wheel drive vehicles with engines less than 1,500 cc.

It was not possible to estimate the revenue loss due to the tax cut.

In March, the government announced the tax break to encourage vehicle purchases. The country had already been affected by the economic slowdown resulting from the outbreak of coronavirus.

The tax break was originally scheduled to end in June but it was extended through August.

According to the ministry, auto production grew 49% annually between January and June, both for domestic markets as well as exports. The ministry said that domestic monthly sales are also recovering, with 83,000 units being sold in August. This is close to the pre-pandemic level.

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