Friday, September 4, 2009

2011, Start for New Tax On Extra Vehicles in Jakarta

Compiled from the original sources: Jakarta Globe and The Jakarta Post

The city administration says it plans to implement a progressive tax on private vehicles beginning in 2011.

Under such schemes, higher taxes are imposed for each additional car an owner purchases.

The tax is in line with a law surrounding regional taxes that was endorsed by the House of Representatives on August 18.

Reyanalda Madjid, head of the city’s revenue agency, said Jakarta is still waiting for word from the central government before making the scheme a bylaw.

It would take time for that process to wind its way through bureaucratic channels, “so the rational time to start implementing the law is in 2011, not next year,” he said.

Governor Fauzi Bowo said the city was not in a rush to implement the new tax. He said officials must study whether the law would be implemented in Jakarta only or in other provinces.

Once the law takes effect, provincial administrations can impose a maximum vehicle tax of up to 10 percent of the vehicle value - double the previous ceiling of 5 percent - and apply higher taxes on the second and following vehicles owned by an individual.

State news agency Antara reported that the Association of Indonesian Automotive Manufacturers (Gaikindo) had been rejecting the tax scheme since it was still a draft.

The association said the law would hamper the development of the automotive industry in the country.

Meanwhile, transportation experts said that a progressive vehicle taxation system will likely prove insignificant in addressing Jakarta's woeful traffic jams.

Critics contend the progressive tax should be levied along with other traffic-restriction policies and the improvement of public transportation to ease the city's traffic woes.

"Limiting car ownership is only a band-aid solution for traffic problems," said Bambang Susantono from the Indonesian Transportation Society (MTI).

"The key solution is to revitalize public transportation and restrict traffic, including through an ERP *Electronic Road Pricing* system.

"This will at least make people think twice before buying a new car, though what's more important is restricting car use, not ownership."

He added the tax would contribute to reducing the vehicle growth rate in the city, currently at around 10 percent a year.

With the current vehicle growth rate and no breakthrough in traffic management, experts warn the city could see total gridlock by 2014.