Jakarta. Finance Minister Purbaya Yudhi Sadewa said on Thursday that the government will review the tax structure for gold jewelry, following complaints from manufacturers about widespread untaxed, unregistered production in the market.

Executives from the Indonesian Jewelry Producers Association (APPI) met with Purbaya at his office to raise concerns over tax disparities that have disadvantaged legally compliant producers who pay value-added tax (VAT).

The association urged the government to simplify the VAT mechanism and ensure equal treatment across the industry.

Purbaya explained that under the current scheme, jewelry producers are subject to a 1.6 percent VAT at the manufacturing level and 1.1 percent at the distribution level, bringing the total to 2.7 percent.

However, APPI reported that many jewelry makers operate without registering with the tax authority, allowing them to sell directly to retailers without collecting VAT and to offer lower, untaxed prices compared to official producers.

“They’re asking for a system where VAT isn’t only imposed on consumers but is collected directly from the companies,” Purbaya said.

The association proposed a single-tier VAT system, suggesting a flat 3 percent tax at the manufacturing stage, which would simplify monitoring.

“Their proposal is to impose a 3 percent VAT directly at the factory level, so consumers no longer have to pay tax at the retail end. That would make control more efficient,” Purbaya said.

He noted APPI’s estimate that around 90 percent of jewelry producers in Indonesia operate informally and do not pay VAT as required, resulting in significant losses in potential state revenue.

Given these findings, Purbaya said the government is considering collecting VAT directly from producers to broaden the tax base and boost state income.

“If this can help increase tax revenue, I’ll move forward with it,” Purbaya said.

Add as a preferred source on Google +