The government will introduce a new policy on January 1, 2010, that will refund sales tax (VAT) spent on purchases by tourist visitors to Indonesia.
Speaking to Bisnis Indonesia, the Director of Tax Regulation, Catur Rini Widosari, said the government will set a minimum level of Rp. 5 million (US$500) to qualify for the 10% tax rebate, but there will be no maximum limit under the new policy.
Catur explained: "There is no maximum amount that can be spent for the tax refund that applies to items personally brought by tourist visitors when they depart an Indonesian seaport or air gateway. The actual procedures will be set out by the Minister of Finance."
She also explained that the new tax refund policy is meant to act as an incentive to encourage foreign visitors to shop in Indonesia. Adding, "hopefully, small industries will flourish as visitors usually have high expenditures on handicrafts."
When challenged by the press that the incentive might cause a loss in tax revenues for the government, Catur retorted: "If you're talking about sales tax (PPN), don't hope for large tax revenues because PPN is meant for regulating (the market). Let the tax revenues come from (higher) income and payroll taxes (PPh). More tourist expenditures will mean higher incomes for the traders."
The Head of the Special Committee on Taxation from the House of Representatives (DPR), Melchias Markus Mekeng, said the tax refund facility would come into operation on January 1, 2010.
Melchias said the ideal minimum level of expenditure to qualify for a tax refund would be Rp. 3 million (US$300). "In Singapore people spending only US$100 qualify for a rebate, but because this is the introductory phase, we have agreed on a minimum of RP. 5 million," he explained.
The tax refund will apply only on purchases made in Indonesia and personally brought by visitors with them when they depart Indonesia.
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