Car Tax in Indonesia is the Highest in the World, Can Be 30 Times Higher

KatadataOTO – Economic conditions are touted as one of the reasons for the decline in new car sales in Indonesia. However, this is not the main factor.

However, the high vehicle tax rates in the country are believed to make people reluctant to buy new cars.

“A few years ago, I was asked by a representative of the US Automotive Council. They said your (Indonesia's) taxes are the highest in the world, and when I checked, it turned out to be true,” said Kukuh Kumara, General Secretary of the Association of Indonesian Automotive Industries (Gaikindo) in Jakarta, on Monday (25/08).

Kukuh then gave an example, the vehicle tax for a Toyota Avanza in Indonesia is almost Rp 5 million.

Photo : Special

According to him, this amount is considered very expensive. Because it is five to 30 times higher than in other countries.

“Meanwhile, in a neighboring country (Malaysia), which actually imports from us, the tax is less than Rp 1 million. In Thailand, it's even lower at Rp 150,000,” said Kukuh.

Of course, the high motor vehicle tax set by the Indonesian government is a heavy burden on the people in the country.

So it is not surprising that people have become reluctant to buy new cars in recent times.

“Then, in their country (Thailand), there is also no five-year tax,” Kukuh emphasized.

On the other hand, a similar sentiment was expressed by Riyanto, an automotive observer and Senior Researcher at LPEM FEB UI. He mentioned that almost half of the On The Road (OTR) price of a new car in Indonesia consists of tax instruments.

“Our (Indonesia's) vehicle tax is about 40 percent. Whereas (Thailand's) is only 32 percent,” said Riyanto on the same occasion.

Riyanto stated that there are a number of tax instruments imposed on the public when buying a new car. For example, the Sales Tax on Luxury Goods (PPnBM).

Then there is the Value Added Tax (PPN), Vehicle Title Transfer Fee (BBNKB), and Motor Vehicle Tax (PKB). All of these instruments cause the price of new cars to soar.

Photo : Special

Furthermore, Riyanto stated that the BBNKB is not collected in Thailand. Whereas in Indonesia, it is set at 12.5 percent.

It's no wonder that the price of four-wheeled vehicles in the Land of the White Elephant is much cheaper than in Indonesia.

“In my opinion, if we want to be competitive with Thailand, there must also be a sacrifice. In terms of price reduction, it is impossible for us to compete with Thailand, whose prices are much lower,” Riyanto concluded.