The Government Chooses To Give Free Taxes To The Automotive Sector Than Property, Which One That Has Higher Added Value?

JAKARTA - The government has decided to provide incentives for the automotive sector in the form of a reduction in the Luxury Sales Tax (PPnBM) or 0 percent tax in effect in March 2021. The purpose of the free tax is to restore the national economy affected by the COVID-19 pandemic.

However, this policy has created jealousy for other industries, one of which is the property sector. Indonesia Property Watch CEO Ali Tranghanda spoke about the government's decision to provide incentives for the automotive sector over the property sector. He said the government should not forget that the sectors affected by the pandemic were not only automotive.

According to Ali, there are other sectors that also have the potential to become the locomotive of the national economy, but currently being hit by pandemic pressure, namely the property sector. This sector is capable of influencing 174 related industries to grow together. It will even further leverage the national economy.

"It is fine for the government to provide 0 percent tax for the automotive sector, but the government should not forget that the property sector has the potential to boost the national economy as an economic locomotive", he said, in Jakarta, Tuesday, February 16.

The property sector has a higher added economic value

Compared to the automotive sector, the property sector has relatively better added value for the community. Relaxation in the automotive sector may be good for 'saving' the industry, but in the long run, it will lead to congestion and a decline in asset value.

In fact, Ali considered buying a vehicle in this current condition was not a wise decision. The community, he said, also needs to be educated, especially the younger generation, about the importance of having property assets for long-term future savings.

"Currently, the property market is not losing purchasing power, because the data shows that there is still purchasing power, especially the middle to upper class, who inevitably can be a 'savior' of the current property market. They are just delaying it", he said.

Likewise, the Director General of Treasury at the Ministry of Finance of the Republic of Indonesia Andin Hadiyanto said that the property sector has indeed made a major contribution to the economy.

"Because the property sector is very strategic, embedded in various dimensions, not only the economic dimension but also the social, financial and fiscal dimensions", he said.

For example, in the capital city, according to data from the DKI Jakarta Provincial Government, the construction and real estate industries contributed 17.61 percent to the economy of Jakarta in 2019.

Contributions were also provided in the form of domestic investment reaching IDR 14.8 trillion or 23.9 percent of the total investment in DKI Jakarta. This sector also contributed foreign investment worth IDR 17.5 trillion or 28.3 percent of the total investment. This industry also absorbed 425 thousand workers in 2018.

The property sector also needs government support

Ali Tranghanda said that just like the automotive sector, the property sector also needs help from the government to survive this COVID-19 pandemic. According to Ali, with the incentives from the government, the upper to middle class will enter the property sector with the current market momentum for investment.

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Currently, there are also many regions that increase the Sales Value of Tax Objects (NJOP) and increase the transaction value related to taxes. Instead of getting higher regional income, the property market has dropped drastically.

"It should be given a reduction in NJOP which encourages more property transactions", he said.

Based on research conducted by Indonesia Property Watch, people's interest in buying property is currently still high at 68.09 percent. Some of these factors are factors in delaying the purchase of property, including the amount of down payment, high interest rates, the amount of taxes, and the amount of transaction costs.

As is known, 0 percent of down payment is possible, although not all banks apply this according to their respective risk management. However, bank interest rates are currently still relatively high even though they have started to decline.

"The interest incentive policy that has been implemented by the government for low-income people (MBR) should also be extended to the middle class so that access to purchase property is wider", he said.

On the other hand, said Ali, the 5 percent cost of the Land and Building Rights Acquisition Fee (BPHTB) that buyers charge at 5 percent is currently still considered high. Plus notary fees and others that can reach 11 percent to 12 percent. Not to mention the 10 percent VAT imposition, so that consumers who buy property from developers are burdened with taxes and fees of 21 percent to 22 percent.

According to Ali, in the current conditions, there needs to be a significant relaxation strategy from the government in order to move the real property market. "That is if the government still believes that the property sector is the locomotive of the national economy", he explained.

Property sales in the fourth quarter of 2020 fell 20.59 percent

Bank Indonesia (BI) noted that property sales in the fourth quarter of 2020 were still falling. During that period, residential property sales contracted by 20.59 percent on an annual basis or year on year (yoy) in the fourth quarter of 2020.

Head of the BI Communication Department, Erwin Haryono, explained that the contraction experienced by the property sector in the fourth quarter of 2020 was much better than the previous quarter which was 30.93 percent.

"The decline in residential property sales occurred in all types of houses", he said, in a written statement, Tuesday, February 16.

However, Erwin said, in terms of Residential Property Prices (SHPR), Bank Indonesia indicated that residential property prices rose in the fourth quarter of 2020. This was reflected in the increase in the Residential Property Price Index (IHPR) in the fourth quarter of 2020 by 1.4 percent (yoy), slightly lower than the growth in the previous quarter of 1.51 percent (yoy).

"IHPR is estimated to have limited growth in the first quarter of 2021 at 1.17 percent (yoy)", he explained.

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