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Hybrid Vehicles to Be Imported Tax-Free

Japanese-Indonesian Trade Agreement May Tax-Exempt the Import of Vans and Small Busses for Bali's Tourism Industry.

(8/24/2008) In accordance with an economic cooperation agreement signed between Indonesia and Japan energy-efficient hybrid cars will soon be free of import tax in Indonesia.

Current law covering the importation of completely built up (CBU) vehicles from Japan with an engine size of 3,000 cc or more are subject to an import tax of 10%. According to Bisnis Indonesia, the Economic Partnership Agreement now in place between Japan and Indonesia provides for the phased elimination through 2012 of import duties on cars with engine sizes of more than 3,000 c.c.. The Director of Land Transportation Vehicles and Aircraft from the Indonesian Department of Industry, Syarif Hidayat, said the gradual elimination of the import tax is intended by the government to act as an incentive for the importation of Japanese hybrid vehicles.

Hidayat said the government has yet to specifically stipulate which brands of hybrid vehicles will be exempted from import duties under the Economic Partnership Agreements. In principle, however, the tax-free facility will be applied without prejudicing the status of the domestic automotive industry.

Syarif said: "The hybrid vehicles will be imported under the scheme provided in the free trade agreement, Clearly, there is a timetable for the reduction of import duties for vehicles with engine sizes above 3,000 cc, and perhaps the hybrid vehicles may qualify for free import."

A Contradiction?

A closer examination of the terms of the tax-free agreement should deflate the hopes of anyone expecting to purchase in Indonesia a bargain priced Toyota Prius - the most popular Japanese hybrid vehicle in the world today. With an engine size of 1,500 cc, the Toyota Prius would not qualify for tax exemption under the terms of the joint Japanese-Indonesian agreement. In fact, at an entry level of 3,000 cc, the tourism industry may only benefit from the tax-free facility in the importation of busses operating with hybrid technology.

Syarif said the government is exploring steps to create incentives for the national automotive industry to accelerate the introduction of environmentally friendly energy-efficient vehicles.