Gov’t Offers Tax Incentives for Automotive, Property Sectors to Speed Up Economic Recovery
In a bid to speed up the national economic recovery, the Government provides tax incentives in automotive and property sectors.
“The automotive industry is a labor-intensive industry, with 1.5 million direct workers and 4.5 indirect workers. The automotive supporting industry contributed Rp 700 trillion to GDP in 2019. There are also approximately 7,451 factories that produce input products for the automotive industry. Therefore, we need to maintain the national automotive industry,” Coordinating Minister for Economic Affairs Airlangga Hartarto said during a joint press conference with Minister of Finance Sri Mulyani Indrawati, Minister of Public Works and Public Housing Basuki Hadimuljono, and Minister of Industry Agus Gumiwang Kartasasmita in Jakarta, Monday (01/03).
Airlangga added that fiscal incentives for the property sector are based on the fact that the contribution of property sector in the form of real estate and construction to GDP during the last 20 years has continued to increase, from 7.8 percent in 2000 to 13.6 percent in 2020. However, the last year’s growth in the property sector contracted by minus 2.0 percent and the construction sector recorded minus 3.3 percent growth.
“Workers in the property sector also continued to increase from 2000 to 2016, decreased slightly to 9.1 million in 2019, and decreased to 8.5 million in 2020,” he added.
In the meantime, Minister of Finance said that the two policies are complementary and mutually reinforcing in stimulating household consumption, and are part of the 2021 National Economic Recovery program package with approximately Rp 699.43 trillion budget.
The two policies are expected to increase middle class household consumption which is constrained in 2020 due to the pandemic. The purchasing power of middle-class households is relatively unaffected by COVID-19, but their level of consumption has decreased due to restrictions on mobility and disruption that limit their confidence in carrying out activities.
Regulations related to tax incentive policies for motor vehicles have been stipulated in the Regulation of Minister of Finance Number 20/PMK.010/2021, which regulates the incentive policy for reducing tax rates for specific motor vehicles, as well as in the Decree of Minister of Industry Number 169 of 2021.
In addition, the property sector incentive policy in the form of tax discounts through Government-borne VAT (DTP) facilities is provided for the sale of landed houses or residential units for six months, starting from March 2021.
Minister of Public Works and Public Housing Basuki Hadimuljono said that providing incentives for property purchases is an important policy considering that this sector is very strategic in the economy, has a multiplier effect to various sectors in the economy, and is able to absorb large numbers of workers. In addition, the housing sector which consists of the construction sector and the real estate sector contributes to GDP by around 13.6 percent.
The tax incentive policy for motor vehicles and the property sector is expected to be able to attract the middle class to increase consumption. Expenditures for durable goods (motor vehicles and property) are expected to stimulate household consumption, which has the largest contribution to economic growth. (PR of Ministry of Finance/PR of Coordinating Ministry for Economic Affairs/PR of Ministry of Industry/PR of Ministry of Public Works and Public Housing/UN) (RI/LW)