Jakarta. The government’s plan to raise the value-added tax, or VAT, is raising concerns from Indonesian car buyers, some even choosing to make their purchase before the policy enters into force.

Starting in January, the VAT will rise from the current 11 percent to 12 percent. If the VAT goes up, so does the total price one has to pay for a car or motorbike. Prio was one of the many Indonesians who tried to look for a new vehicle at the Gaikindo Jakarta Auto Week (GJAW) in Tangerang over the weekend. Prio admitted that the imminent tax hike had left him worried as that would mean he would have to pay more when getting his new car.

“If I want to buy a new car, I would have to prepare extra money [following the tax hike]. I might even have to change the type of car that I want. I would have to go for the lower-tier specifications,” Prio said.

He now hopes the government will delay the VAT hike, citing that people have only just recovered from the Covid-19 pandemic. Increasing the tax hike might also not be a good idea amidst the massive layoffs taking place throughout the year.

Likewise, Tangerang resident Neno said that the 12-percent VAT would only place an additional burden on the people's finances while hoping for the government to postpone it until the economy fully recovers. Neno even decided to purchase a car earlier at the GJAW auto expo that day. Neno said: “It’s better to [buy cars] now. We can make a down payment first so we don’t have to pay for the 12-percent VAT.”

Car buyer Agam also admitted that he was not on board with the upcoming VAT hike.

“It will weaken the people’s purchasing power. People will think twice when buying a car because they will have to pay more taxes,” Agam said.

Indonesia has reported weaker new car sales this year, automotive industry association Gaikindo data shows. Overall, the wholesale new car sales stood at 633,218 units in January-September, down by 16.2 percent from the previous year. Retail car sales also declined 11.9 percent year-on-year from 746,246 units to 657,223 units over the same nine-month period.

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