Indonesia

Indo to scrap cattle tax, but permit extensions still unclear

James Nason, January 23, 2016

The good news: Indonesia to scrap the recently announced 10pc tax on cattle sales.

The bad news: Unless permit dispensations are secured soon, there will be no cattle exports from Australia to Indonesia in April.

Live export steers

The 10 percent Value-Added Tax (VAT) introduced on cattle sales in Indonesia earlier this month will be scrapped, Indonesian officials announced in Jakarta on Friday, to collective sighs of relief from the Australia-Indonesian cattle trade.

Indonesia’s coordinating economics minister Darmin Nasution told reporters in Jakarta the recently introduced regulation will be revised to exempt livestock-related businesses, including cattle imports, from the 10pc tax.

The industry is yet to be told formally when the VAT will be rescinded, but for now the news has been greeted as a positive development by the trade.

The cattle industry had warned the new 10pc tax would force beef prices higher in Indonesia, in direct opposition to the Government’s aim of reducing inflationary pressure on food prices.

As reported by Beef Central last week, Indonesian butchers retaliated against the higher prices by taking strike action. Import industry sources at the time said they hoped the tax would be short-lived because it worked against the Government’s push to lower beef prices in Indonesia.

“We’ve asked the Finance Ministry to temporarily stop imposing the value-added tax because it has a tremendous impact on strategic food [stocks],” Darmin told media in Jakarta.

The roll back was also confirmed by Astera Primanto Bhakti, director of the Finance Ministry’s center for state revenue policy.

“Livestock will be exempt from value-added tax in a bid to synergize policies on strategic food, accordingly to the VAT regulation on strategic goods,” he said in a statement.

Djarot Kusumayakti, president director of the State Logistics Agency (Bulog), told Reuters he hoped the decision would lead to lower beef prices.

“We hope the decision will prevent traders from increasing prices due to psychological factors. But there is no any guarantee,” he said.

On Friday, Bank Indonesia Governor Agus Martowardojo also weighed in on the matter, cautioning that the imposition of the VAT would stoke inflationary pressure.

The tax will also be removed on poultry businesses.

It has been reported that Indonesia’s Chamber of Commerce also protested to the Coordinating Ministry of Economics, saying that the VAT would lead to double taxation, rather than protecting stock farmers.

“VAT is not imposed on food anywhere in the world because it will affect a lot of people,” said chamber official Juan Permata Adoe.

Permit extensions are a bigger concern: ALEC

The Australian Livestock Exporters’ Council told Beef Central that, provided the reporting by Indonesian media is accurate, it would appear the Indonesian Government has responded to the significant concerns of lot feeders and butchers in Indonesia by removing the tax.

However, the council says it is more concerned at this point about securing approval from the Indonesian Government for first term permits to be extended into April.

“Our key focus at the moment is not the tax but seeking a dispensation on the existing import permit,” ALEC CEO Alison Penfold said in a statement to Beef Central.

“We are seeking the Ministry of Trade to allow the permit to cover shipments of cattle out of Australia and delivery to Indonesia during April.

“Unless this matter is resolved, there will be no cattle exports from Australia to Indonesia in April.”

 

 

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