Economist Says Elimination Of US Import Tariffs Can Reduce State Revenue

Photo: Special

JAKARTA - Head of Bank Permata economist Josua Pardede conveyed that the trade agreement between Indonesia and the United States (US) which includes the implementation of a zero percent tariff on imported goods from the US has the potential to have significant implications for state revenue, especially in the field of customs and excise.

Josua estimates that in the short term, this policy is expected to have an impact on reducing import duties.

"Although the share of US products in total imports of Indonesia is relatively moderate compared to China or the ASEAN state, the loss of potential income from the elimination of US import rates will still be felt," he told VOI, Thursday, July 17.

Historically, he explained, import duties averaged around 2 percent to 3 percent of total state revenues, so the direct impact on the state budget is estimated to be relatively limited, but cannot be completely ignored, especially in a fiscal situation in Indonesia that faces the challenge of tax revenue.

According to him, specifically, the abolition of tariffs will be more significant if US goods imports are dominated by consumption products that have high rates, such as food products, motorized vehicles, and certain electronic goods.

On the other hand, he said that if imports from the US are more dominated by capital goods and raw materials which had previously been subject to low tariffs or even zero percent, their impact on state revenues would be relatively minimal.

"Thus, the structure of imports from the US to Indonesia will determine how much pressure on state revenues from the import duty side," he said.

Meanwhile, in terms of state spending, Josua said that the implications of the agreement requiring the Indonesian government to increase the purchase of US products have the potential to increase the burden of APBN expenditure in the short to medium term.

"Especially if this trade agreement targets the procurement of strategic goods, such as technology products, defense equipment, or relatively expensive infrastructure," he said.

According to him, this has the potential to reduce the government's budget, especially if the price of products from the US is higher than the alternative from other countries.

Josua hopes that Indonesia must ensure that this US product expenditure is directed to products that really have strategic added value and are able to increase efficiency in the long term, such as information technology, green energy, or industrial equipment that can encourage increased national economic productivity.

On the other hand, he added that if Indonesia manages to optimize imports of US products that are investment-oriented and strategic raw materials such as ICT equipment, advanced industrial machinery, or health and pharmaceutical products that so far have high import rates, this policy can actually have a positive effect on production efficiency, domestic industrial competitiveness, and national economic productivity in the medium to long term.

"This positive effect can ultimately result in higher economic growth, which will indirectly increase tax revenue and compensate for some decreased income from import duties," he said.

Menurutnya, kunci utama bagi Indonesia dalam menghadapi dampak kesepakatan perdagangan ini adalah mengelola secara selektif jenis produk yang diimpor dari AS serta menyusun strategi optimalisasi anggaran belanja negara, sehingga dampak negatif terhadap penerimaan bea masuk dapat diminimalisasi dan manfaat jangka menengah-panjang dari kesepakatan ini dapat lebih dioptimalkan.

Dia menambahkan secara keseluruhan, kebijakan ini menegaskan pentingnya sinergi antara kebijakan perdagangan luar negeri, fiskal, dan industri agar tercipta keseimbangan antara target penerimaan negara dan tujuan pembangunan ekonomi nasional.

According to him, the main key for Indonesia in dealing with the impact of this trade agreement is to selectively manage the types of products imported from the US and formulate a strategy to optimize the state budget, so that the negative impact on import duties can be minimized and the medium-long term benefits of this agreement can be further optimized.

He added that overall, this policy emphasizes the importance of synergy between foreign, fiscal, and industrial trade policies in order to create a balance between state revenue targets and national economic development goals.