Simalakama Car Tax Abolition: Vehicles Piling Up, Road Infrastructure That's All

Car illustration (Photo by courtesy)

JAKARTA - The government's discourse that will impose incentives for the sale of luxury goods borne by the government (PPnBM-DTP) in the motorized vehicle sector on March 1 is considered to present its own risks to the national transportation arrangement.

Executive Director of the Institute of Transportation Studies (Instran) Deddy Herlambang said that the latest policy to be released is contradicting the spirit of mass transportation arrangements that the government has recently been promoting.

"The transportation sector has struggled for years on how to manipulate traffic so that it does not jam and road traffic will return to productivity," he said in a written statement to VOI, Tuesday, February 16.

According to Deddy, the PPnBM-DTP regulation will lead to more affordable motor vehicle selling prices, which means increasing the volume of vehicles that will hit the roads.

"With the elimination of car PPnBM, tax discounts and even the possibility of a 0 percent down payment, this can be likened to a disaster for transportation arrangements," he said.

Minimal road infrastructure

To this day, Indonesia is called Deddy each using indicators of economic success as measured by the purchase of four-wheeled vehicles (cars).

"Maybe there is still a conservative view that if the traffic jam is very good, it means the economy is successful," he said.

He added, when compared to the mode-share of public transport (Bappenas data) in Jakarta, Bandung and Surabaya, it is also still below 20 percent and far below Singapore (61 percent), Tokyo (51 percent), and Hong Kong (92 percent).

Meanwhile, when viewed from the gross domestic product (GDP), these three countries clearly surpass Indonesia. However, the reality is that there are far more public transport users there. This means that their economic progress is not based on vehicle ownership.

For the record, the TomTom Traffic Index in 2020 removed Jakarta from the top 10 most congested cities in the world to position 31.But what needs to be remembered is that the traffic index was released during a pandemic situation with the fact that many employees work at home, business activities stop and schools carry out their activities at home .

Illustration. (Angga Nugraha / VOI)

"The number of our vehicles is still very large when compared to the minimal road infrastructure, road growth is only 0.01 percent per year, compared to the growth of new vehicles which reaches 16 percent per year," he said.

Failure of Transportation Demand Management (TDM)

If it is true that the free PPnBM scenario, tax discount, up to 0 percent DP actually occurs, then it can have a negative impact on the development of the Transportation Demand Management (TDM) concept. This scheme itself requires its own regulations and strategies to minimize the need for private vehicles.

Deddy predicts there will be a 'split' in the government body. This is because officials working in the transportation sector will refer to performance measurement using indicators to minimize traffic congestion and suppress road accidents.

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An annual evaluation within the Ministry of Transportation states that increasing the number of vehicles will result in increased congestion and the potential for road accidents.

Meanwhile, for those working in the economic sector, the level of success is measured based on the output produced.

"It is clear that there is a big gap of interest here if there is no compromise, and of course what will be disrupted is the transportation system itself," he said.

“This free PPnBM is like a nightmare during the day for the transportation sector. The TDM approach will fail because the shifting target to public transport is projected to be very difficult to achieve, "continued Deddy.

Government economic assumptions

As previously reported, the government through the Ministry of Finance (Kemenkeu) is preparing to impose PPnBM-DTP on March 1 with the hope of becoming a booster for the national automotive industry.

It was stated that this policy would target motorized vehicles with the ≤ 1,500 cc segment for the sedan and 4x2 categories. This segment was chosen because it is a category that is of interest to the middle class and has local purchases of over 70 percent.

The tax discount is carried out in stages until December 2021, provided that 100 percent of the normal rate will be given in the first three months. Then, 50 percent of the normal rate for the following three months, and 25 percent of the normal rate in the third stage for the next four months.

In order to smooth out this strategy, the government then collaborated with Bank Indonesia and the Financial Services Authority to encourage motor vehicle purchase loans by setting a 0 percent down payment and reducing RWA Credit (Risk Weighted Assets).

Coordinating Minister for Economic Affairs Airlangga Hartarto said the automotive industry was one of the sectors that was most affected by the COVID-19 pandemic.

Coordinating Minister for Economic Affairs, Airlangga Hartarto. (Photo: Doc. Setkab)

In fact, the manufacturing sector is a productive line that has a large enough contribution to the formation of gross domestic product (GDP) by 19.88 percent.

"Relaxing PPnBM can increase purchasing power from the public and provide a jumpstart to the economy," he said.

Airlangga added that the government itself is aiming for the target of increasing production to reach 81,752 units. The estimated additional output of the automotive industry is also estimated to be able to contribute to state revenue of IDR 1.4 trillion.

"This policy will also affect state revenues, which are projected to have a revenue surplus of Rp1.62 trillion," he said.

In addition, the automotive industry is considered to have links with other industries. The automotive industry is also a labor-intensive industry with more than 1.5 million people working in this segment of the economy.

"The automotive support industry alone contributes more than 1.5 million people and contributes to a GDP of Rp 700 trillion," he said.

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