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Government Urged to Reduce Luxury Tax

Businesses, Hotels and Restaurants Call for Reduction in 300% Tax on Imported Food and Drink.

(1/20/2009) Both Tempo Interactive and the Jakarta Post quote Indonesian hotel and restaurant business people as calling on the government to urgently reduce the 300% luxury tax now being imposed on liquor. Calling for at least a 50% reduction in the current tax tariff, Carla Parengkuan, Executive Director of the Indonesian Hotel and Restaurant Association (PHRI), said, “the current tax, which is 300 percent, is too high, so liquor is very costly.”

Parengkuan blames high liquor prices as causing distributors to place small orders for sales stocks, a factor that has reduced supply and prompted the already high prices to increase even further. There is little doubt, according to the PHRI executive that the high cost of liquor is costing Indonesia tourism traffic.

Also concerning, she said, is the presumption that the onerous customs duties now being sought for liquor virtually guarantee that smuggling will increase over time.

A Jakarta Post report said that the Indonesian Hotels and Restaurants Association (PHRI), the Indonesian Retail Business Association (Aprindo), and the Indonesian Modern Market Supplier Association (AP3MI) are forming a single chorus complaining that new custom rules which they believe the new rules is impacting badly on their businesses.

The sudden dramatic increase in the cost of luxury goods will also mean that wealthy Indonesians and expatriates will do their shopping abroad, reducing much-needed local spending.

Hotels and restaurants that rely on imported goods to maintain high standards of food and beverage are complaining that not only are imported ingredients now priced much higher, but availability is becoming an increasing problem. Moreover, crucial cooking ingredients used in relatively small quantities are in short supply as importers see no profit in undertaking the complicated and costly import permits procedure. One PHRI official pointed to the difficulties being experienced by Japanese supermarkets and Japanese restaurants where sources of imported ingredients, such a soy sauce and wasabi, are drying up.

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