Small businesses feel the pinch of new import tax regulation

Fadli and Eisya A. Eloksari

The Jakarta Post


A government decision to lower the tax threshold for imported goods has adversely affected small e-commerce businesses and jastip (individual wholesalers), sellers have claimed.

Dardani Nainggolan from Batam, Riau Islands, had planned to send emping crackers worth Rp 100,000 (US$7.33) to his relatives in Pekanbaru, Riau, but decided not to after considering the fees involved.

“After calculating the tax, I know that sending the chips was not worth it,” Dardani told The Jakarta Post on Friday. “The tax officers assumed the chips were worth Rp 150,000 and they charged PPN [value added tax] plus import duty. But in the end, I decided to cancel the shipment to my relatives.”

Finance Ministerial Regulation No.199/2019, which took effect on Thursday, lowered the tax threshold for imported goods to US$3 per item from the previous $75.

Taxable imported goods will be subject to an import duty of 7.5 percent and a value-added tax of 10 percent. Previously, importers had to pay a 10 percent income tax in addition to the import duty and value-added tax. With the revision, total taxes that must be paid will be only 17.5 percent instead of the previous 27 percent.

As a free trade zone, goods sent from Batam to other parts of the country are subject to import duties and other taxes. With such a status, goods entering Batam from abroad are exempt from customs rules, including import duties and other taxes.

Lisa Athalla, who owns an online cosmetics business, has also had to cancel several product orders outside of Batam due to the import duty and shipment fee.

“A night cream, for instance, costs Rp 60,000, but I would need to pay a tax before shipping the product, and so I cancelled the shipment because the customer did not pay for the tax,” she said, adding that the products were from Malaysia and her customers were based in Java and Sumatra.

Batam Online Community head Saugi Sahab said the customs and excise offices had provided information regarding the regulation, adding that it had caused a significant decline in shipments out of Batam.

“Before the regulation took effect, 150 to 200 packages were shipped each day from Batam. But now, not even a single package is being shipped,” said Saugi, also handles shipments at the Batam office of courier company Lion Parcel, a subsidiary of Lion Air Group.

“We were also asked [by tax officers] to show customers’ NPWP [tax identification numbers]. If we don’t, they will charge more money,” said Saugi, adding that the regulation had adversely affected home-based online businesses and jastip services.

Meanwhile, the head of the customs and excise office in Batam, Susila Brata, said the regulation had involved recommendations from many stakeholders, including crafts associations, online marketplaces and merchants.

“It is meant to implement a fair tax regime in Indonesia and protect local industries,” Susila told the Post, adding that only the Finance Ministry and Finance Minister Sri Mulyani Indrawati who could review the regulation.

“We need to perfect the implementation based on experience in the field,” he added.

Separately, the Indonesian Employers Association (Apindo) has welcomed the government’s move to lower the tax threshold on goods imported for retailing on e-commerce platforms, saying the policy was the right step to protect small and medium enterprises (SMEs) against imported consumer goods.

Apindo chairman Hariyadi Sukamdani said the sharp increase in foreign products sold through online marketplaces had severely hurt local producers because of a lack of protection from the government.

He said the number of imported goods sold through e-commerce platforms had increased to 57.9 million items in 2019 from only 19.5 million in 2018 and 6.1 million in 2018.

“If e-commerce retail products keep coming in, it will severely hurt our SMEs,” he said during a press conference on Thursday, adding that the government’s new import tax regulation was an appropriate move to tackle the issue.

According to data provided by the customs office, about 90 percent of products sold through online marketplaces in Indonesia are imported. This was possible because some of the local online marketplace operators had foreign partners, such as Lazada with Taobao from China and with American online store eBay.

The data also suggested that in 2018, sales of imported goods sold through online stores rose by an average of 10.5 percent per month.