Monday, August 4, 2008

Bill Proposes Tax Refunds for Foreigners

Lawmakers in August will begin deliberating a bill on the value added tax, the sales tax on luxury goods and a tax refund scheme for foreign tourists shopping here.

The bill calls for the ceiling rates of the luxury tax to be raised from the current 75 percent to 200 percent. The floor rate would remain at 10 percent, said Vera Febyanthy, head of the House's working committee for the bill, on Monday.

The bill does not, however, set clear standards or definitions on which goods are considered luxury items, she added.

"We will ask the government to provide definitions of luxury items. It must categorize which goods would be liable to the high tax," Vera said.

Yachts, big motorcycles and some cars are considered luxury items in the bill, she added.

However, she said, the government should not impose high taxes on electronic goods such as televisions, which could now be classified as a basic need.

In February, the Directorate General of Taxation cut the 20 percent luxury tax on certain electronic goods to 10 percent.

Also in the bill, the directorate general is proposing a tax refund scheme for foreign tourists shopping in Indonesia similar to tax refund schemes used in other countries, including Singapore.

Visitors to Singapore can claim a refund on the goods and services tax (GST) paid on purchases. To claim the refund, tourists must make their purchases from participating stores.

"The Directorate General of Taxation will need to work with the Directorate General of Immigration for this to happen," Vera said.

While the Directorate General of Taxation would suffer losses from the reduction in tax income, Vera said, it would reap profits by increasing the income tax of businesses offering tax refunds.

Vera said the bill was expected to be finalized by the end of the year and could be implemented next year with the bill on income tax.

Source: The Jakarta Post, Fri, 08/01/2008 12:34 PM

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