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Government Moving to Check Rising Food Costs

Value-Added Tax and Import Duties on Key Food Commodities to be Repealed as Indonesian Government Reacts to Rapidly Increasing Food Costs.

(1/8/2011) In an urgent step to curb inflationary food prices the Indonesian government will abolish value-added taxes and import duties on a number of food products.

Bisnis.com reports that the Coordinating Minister for the Economy, Hatta Rajasa, is concerned at the effect rapidly rising world food prices in the fourth-quarter of 2010 is having on the cost of food in Indonesia. As a result, the Minister will take steps to stabilize prices of basic food items through the application of financial instruments. Explained Hatta: "Yes, as regards fiscal measures, for example, value-added taxes and import duties, will be suspended to stop prices from rising."

He told the press that the government is still waiting for recommendations on which commodities should be exempted from import duties.

Those recommendations are scheduled to be in hand on Monday, January 10, 2011 with a regulation from listing the items to be exempted from import taxes to be published one or two days later by the Minister of Finance.

Hatta said: "We will make fiscal policies affecting trade. We will suspend import duties for flour, soybeans and livestock products. We will do all this to stabilize the cost of basic food commodities. Sugar has not yet been included in the items free of import duties. In our meeting (sugar duties) were not discussed as we wished for our sugar producers to progress." Hatta did not rule out eventually removing duties on sugar in the future in the continuing efforts to control prices.

The government will also undertake "market operations" in which goods experiencing sudden price hikes will be released into the market place by the government to prevent price gouging.