Indonesia Govt’s import tax plan faces backlash from merchants and buyers

The government’s plan to lower the tax threshold for e-commerce retail imports is facing a backlash, with merchants worried that the new policy will cause a sharp decline in sales.

Mustika Rahma, a 23-year-old e-commerce merchant that retails on Instagram and several online marketplaces, told The Jakarta Post on Thursday that the new policy would discourage buyers from purchasing imported goods because they would have to pay a higher import tax.

“We feel threatened by this regulation because sales will go down as prices skyrocket,” said Mustika, who sells 100 percent imported fashion items and accessories.

She added that her online store had recorded a spike in sales following the government’s announcement: “I think customers are taking advantage of the opportunity before prices go up.”

“The good thing about the regulation is that we will no longer need to play cat and mouse with the customs office, since we [e-commerce merchants] are being recognized by the government,” Mustika added.

Starting in January 2020, the government is imposing a lower tax threshold of just US$3 (Rp 42,000) on consumer goods imported for retailing on e-commerce platforms, from $75 previously. The measure is aimed to protect locally made products from cheaper imported goods.

In addition to reducing the tax threshold for e-commerce retail imports, the government only impose import duty of  7.5 percent and  value-added tax of 10 percent on e-commerce retail imports . Previously, besides import duty and value added tax, imported goods were also subject to 10 percent income tax.

 

“With the revision, the duties and taxes imposed on imported goods is reduced overall to 17.5 percent, from between 27.5 percent and 37.5 percent previously,“ said customs and excise directorate general Heru Pambudi on Monday.

Customs data shows that e-commerce retail imports jumped to nearly 50 million items in 2019, compared to 19.6 million items in 2018 and 6.1 million in 2017, with most of the goods imported from China.

“This is to protect local companies that produce goods for trade in e-commerce, such as sandals, crafts and handbags,” said Heru.

Meanwhile, 21-year-old Nadzira Zafina, a fashion enthusiast who prefers imported shoes and bags, said that she was likely to stop buying imported products through e-commerce platforms when the regulation became effective at the end of January.

“Several imported products, particularly branded […] bags and shoes, are better in terms of quality compared to local products,” she said. “We could, however, still buy imported products through jastip [individual wholesalers], as the tax will be much fairer,” she told the Post.

Nadzira was referring to the government exemption of import duties on goods of up to $250 per person or $1,000 per family that are brought into the country from overseas trips.

Local K-pop fans have also expressed their disappointment on social media (https://www.thejakartapost.com/news/2019/12/24/indonesian-k-pop-fans-fume-over-tariff-on-e-commerce-imports.html) after the government’s announced tax hike on e-commerce retail imports.

“One K-pop album costs $14-18. Next time I buy an album, I could be paying Rp 400,000 ($28.86) for it,” bemoaned Twitter user f. (@buryoneself).

Heru told reporters that the new tax policy was issued in response to the demands of the general public and businesses, and would allow domestic goods to compete head-to-head with foreign goods.

Meanwhile, Indonesian E-commerce Association (idEA) chairman Ignatius Untung told the Post that the idEA was still discussing the regulation to determine its stance.

In contrast, Tokopedia CEO William Tanuwijaya welcomed the policy, saying that it was intended to reduce the worsening trade deficit.

“Other than leveling the playing field for local producers and merchants, this regulation will provide an opportunity for local businesses to import products officially,” William said in a statement to the Post. “[In turn], Indonesians will benefit economically in the form revenues of new jobs to increased tax .”

Adrian Wail Akhlas

The Jakarta Post