The Indonesian government has announced plans to revise its tax policies in a bid to promote eco-friendly production of vehicles to further boost the country's economic development.
According to Reuters, ministers said on Monday that Indonesia is gearing up for an overhaul of existing tax schemes on vehicles. Finance Minister Sri Mulyani Indrawati said the changes will be imposed to ease up on restrictions and charges against automotive vehicles.
Instead of charges being based on a car's engine capacity, the schemes will be based on carbon emissions and fuel consumption. "We need to support the transportation industry with a technology that is more competitive," the Minister said.
For luxury cars powered by renewable fuel, the Indonesian government looks to charge an eight percent tax. Electric vehicles will also have no taxes once the changes are approved. As for hybrid cars, tax cuts will be imposed.
Indrawati explained that the idea of revising tax schemes was triggered by climate change concerns that have been closely linked to the global automotive industry. The Ministry assessed how potential changes will affect the environment as well as provide higher revenue for the local government.
The proposed tax changes are also part of Indonesia's efforts in dethroning Thailand as Asia's automotive hub. Industry Minister Airlangga Hatarto said Indonesia produced a total of 1.3 million cars last year. Of the produced vehicles, 346,000 units were exported. These figures are still significantly lower than Thailand's produce.
To help boost the government's automotive plans, Indonesia is planning to process nickel laterite ore to be used in manufacturing lithium batteries. The government sees this move as one of the ways to transform the country into a global hub that produces and exports EVs to other regions.
Earlier this year, the Straits Times reported that the government had been deliberating over two proposed presidential regulations that will encourage production and sales of local electric cars.
The outlet added that the Joko Widodo administration declared its support for the global green movement in the car industry. For this cause, the Indonesian government seeks to reduce the country's dependence on fossil fuel imports.
At that time, Hartarto said he prefers if the local auto industry will gradually shift to global trends by utilizing hybrid electric vehicles. The Minister pointed out that this strategy will be less of a financial burden on the government and the local car manufacturing sector. Gradual changes will also allow for more deliberation on how the industry will meet regional and overseas demand.
