There has been a strong backlash by Indonesian wet market butchers to a sudden new 10 percent tax imposed on cattle by the country’s Ministry of Finance late last week.
As reported by Beef Central last week, the first indication importers received of the new tax was via a ministerial decree received in the mail last Thursday, advising them that the tax had become law and took effect from January 8, 2016.
Indonesian lot feeders were forced to begin adding the new 10pc Value-Added Tax (VAT) to the price of cattle sold to butchers yesterday.
The sudden new impost prompted butchers in cities of West Java to go immediate strike in protest against the tax, with many reportedly stopping all trade activities.
The strikes have also now started to draw the attention of Indonesia’s media to the impact of the new tax.
Importers have told Beef Central that the additional 10pc increase will inevitably push beef prices in Indonesia higher, which will cause demand at wet markets to significantly drop.
That inflationary effect of the new tax is also in direct opposition to President Joko Widodo’s desire to lower the price of beef for Indonesian consumers.
One experienced trade source, who asked not to be identified, said he hoped the tax would soon be removed, as more media and public attention focused on the inevitable inflationary impact it will have on beef prices in Indonesia.
Feedlots throughout Indonesia are currently operating at between 40-50pc capacity, Beef Central has been told, due mainly to quota limitations and also in part due to the difficult trading conditions import and feedlot businesses are facing in the current market.
The current price of beef in the wet market is reported by Indonesian media to be around Rp 105,000 per kilogram.
Inevitably the 10pc tax will cause turbulence and buyers and traders will have to raise their prices, Muhammad Dillar, a beef trader beef and vice chairman of the Tasikmalaya Butchers Association told Indonesian media Kompas yesterday.
Asked if the Australian Government is seeking clarity on the new tax on behalf of the Australian industry, a spokesperson for Federal Agriculture Minister Barnaby Joyce told Beef Central the issue was a domestic tax issue within Indonesia.
“The Indonesian Ministry of Finance has imposed a 10 per cent Value Added Tax (VAT) on feeder cattle, as part of amended non-discriminatory regulations to tighten exemptions from the VAT for a range of imported and local agriculture products,” a statement from the Minister’s office said.
“The tax is being applied equally to all imported and locally produced feeder cattle.
“VAT is a domestic tax issue and within a government’s remit to levy.”