Analysts warn of reducing the posh automotive tax – goal

The government's plan to lower the luxury goods sales tax (PPnBM) on new cars may not automatically lead to an economic recovery, experts say, as job losses, business closures and mobility restrictions amid consumer demand in the face of the ongoing COVID-19 health emergency continue to restrict.

The coordinating minister of economics, Airlangga Hartarto, announced in a statement on February 11th that the luxury tax cut would apply from March 1st to sedans and two-wheel drive vehicles with engines below 1,500 cc.

Under the new system, a 100 percent luxury tax reduction applies for the first three months and a 50 percent luxury tax reduction for the following three months. The government expects the system to significantly lower the price of new cars, which are currently subject to a luxury tax, which according to Law No. 42/2009 is between 10 and 200 percent of the retail price of a commodity.

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