Heaptalk, Jakarta — PT Toyota Motor Manufacturing Indonesia (TMMIN) or Toyota Indonesia has raised concerns about the planned increase in value-added tax (VAT) to 12%.
Bob Azam, Vice President Director of TMMIN, explained that the overall cost increase could be more significant than the 1% VAT jump from 11% to 12%. The VAT hike will also lead to price increases along the supply chain.
“The automotive industry has a deep supply chain, reaching tier 2 and 3 suppliers. If VAT rises by 1%, the multiplier effect could lead to a more than 3-5% cost increase. This raises costs,” Bob said.
He added, “As a result, automotive manufacturers must reconsider the pricing they offer consumers. However, this decision is not easy, given the influx of new manufacturers in Indonesia offering competitive prices. Whether the cost increase will be reflected in prices depends on each company’s policies.”
According to data published by PricewaterhouseCoopers (PwC), Indonesia is among the ASEAN countries with the highest VAT rates for 2023-2024. Indonesia’s VAT rate has been 11% since April 1, 2022, up from the previous 10%. The government is preparing to raise the rate to 12% next year.
This new rate will match the Philippines’ VAT rate of 12%. Meanwhile, Cambodia and Vietnam each have a VAT rate of 10%. Singapore’s goods and services tax stands at 9%. Malaysia is ranked sixth in the region. On March 1, 2024, it increased its Service Tax rate from 6% to 8%. However, some services remain taxed at the previous 6% rate. The separate Sales Tax rate for most goods remains at 10%.
