Indonesia's govt urged to remove freight tax to boost local shipping business
Betting on the remarkable growth of Indonesian trade, the Indonesian National Ship Owners Association (INSA) has set its focus on increasing the market share of local companies in the country’s import-export freight shipment business, The Jakarta Post reports.
As of September this year, overall Indonesian import-export freight totaled 577.3 million tons and is projected to grow by 7 percent annually until 2015 to more than 1 billion tons, according to the association’s estimates.
Currently, local shipping lines handle only around 10 percent of the total exports and imports, leaving the biggest slice to foreign shipping lines.
“(In line with this growth), we aim to gradually increase the freight volume handled by local vessels from 10 percent at present to 30 percent by 2015,” said INSA chairwoman Carmelita Hartoto in an emailed statement.
A prerequisite for achieving this target, Carmelita says, is for Indonesian companies to improve their competitiveness against foreign counterparts, and in this tax plays an important role.
Carmelita said the government should remove the 10 percent value-added tax (PPN) from freight delivered by local shipping lines to allow them to better compete with foreign shipping lines and reap bigger returns in the country’s more intensified international trade activities. The freight tax put a heavier burden on domestic shipping firms as they already paid 10 percent tax on locally-bought fuel.
A tax cut on freight shipments would significantly boost finances and allow the companies to focus on expanding operations, Carmelita said.
According to Carmelita, the country’s shipping industry lost around US$4.14 billion in potential income from the shipment of coal, one of Indonesia’s main export commodities, which totaled 230 million tons last year.
Despite its status as a maritime country, Indonesia’s contribution to the world’s total dead weight tonnage (DWT), which represents shipping capacity, is considered too low. Data from the United Conference on Trade and Development (UNCTAD) reveals that last year the country’s DWT was only 0.8 percent of total global freight, below neighboring countries like Malaysia (1.12 percent) and Singapore (2.53 percent).
Transportation Ministry sea transportation director general Leon Muhammad said that his ministry had discussed the tax cut proposal with the Finance Ministry and awaited their decision.
“The final decision is with the Finance Ministry. It likely has its own considerations as it is related to state income from tax,” he told The Jakarta Post in a telephone interview.
Apart from cutting the value-added tax, the government should also provide incentives to encourage higher participation by local shipping firms in international trade shipment, Carmelita said.
“The government can offer alternatives, such as giving incentives to ease business players, especially exporters and importers, to carry out trading through CIF (cost, insurance and freight) terms instead of FOB (free on board) terms,” she said.
As of September this year, overall Indonesian import-export freight totaled 577.3 million tons and is projected to grow by 7 percent annually until 2015 to more than 1 billion tons, according to the association’s estimates.
Currently, local shipping lines handle only around 10 percent of the total exports and imports, leaving the biggest slice to foreign shipping lines.
“(In line with this growth), we aim to gradually increase the freight volume handled by local vessels from 10 percent at present to 30 percent by 2015,” said INSA chairwoman Carmelita Hartoto in an emailed statement.
A prerequisite for achieving this target, Carmelita says, is for Indonesian companies to improve their competitiveness against foreign counterparts, and in this tax plays an important role.
Carmelita said the government should remove the 10 percent value-added tax (PPN) from freight delivered by local shipping lines to allow them to better compete with foreign shipping lines and reap bigger returns in the country’s more intensified international trade activities. The freight tax put a heavier burden on domestic shipping firms as they already paid 10 percent tax on locally-bought fuel.
A tax cut on freight shipments would significantly boost finances and allow the companies to focus on expanding operations, Carmelita said.
According to Carmelita, the country’s shipping industry lost around US$4.14 billion in potential income from the shipment of coal, one of Indonesia’s main export commodities, which totaled 230 million tons last year.
Despite its status as a maritime country, Indonesia’s contribution to the world’s total dead weight tonnage (DWT), which represents shipping capacity, is considered too low. Data from the United Conference on Trade and Development (UNCTAD) reveals that last year the country’s DWT was only 0.8 percent of total global freight, below neighboring countries like Malaysia (1.12 percent) and Singapore (2.53 percent).
Transportation Ministry sea transportation director general Leon Muhammad said that his ministry had discussed the tax cut proposal with the Finance Ministry and awaited their decision.
“The final decision is with the Finance Ministry. It likely has its own considerations as it is related to state income from tax,” he told The Jakarta Post in a telephone interview.
Apart from cutting the value-added tax, the government should also provide incentives to encourage higher participation by local shipping firms in international trade shipment, Carmelita said.
“The government can offer alternatives, such as giving incentives to ease business players, especially exporters and importers, to carry out trading through CIF (cost, insurance and freight) terms instead of FOB (free on board) terms,” she said.
