Proposed Luxury Goods Sales Tax on Imported Mobile Phones in Indonesia
Both Indonesia's Ministry of Industry and Trade propose to impose a luxury goods sales tax (PPnBM) of 20 percent on all imported mobile phones. Previously, the Ministry of Industry said the new tax rule - if approved - would only apply to cellular phones with a price tag of at least IDR 5 million (USD $442). Now, however, all imported cell phones will be affected. This new tax policy aims to curb imports of mobile phones (thus impacting positively on the trade balance) and to support the development of a domestic mobile phone industry.
Based on calculations of the Ministry of Industry, the PPnBM on mobile phones will curb imports by USD $1.8 billion, while increasing state revenue by IDR 4.1 trillion (USD $362.8 million). The new tax policy is expected to be implemented in October 2014.
The Trade Minister of Indonesia, Muhammad Lutfi, said that the new tax will trigger increased investments in Indonesia as the mobile phone market is lucrative (around 60 million mobile phones were sold in Indonesia in 2013). As an example, he pointed to Taiwan-based Foxconn Technology Group (a multinational electronics contract manufacturer) which will build a mobile phone factory in Jakarta (with an estimated investment of USD $1 billion).
However, one concern is that the PPnBM on mobile phones will result in a larger illegal mobile phone market in Indonesia (through increased smuggled mobile phones imports).