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10% VAT ON AGRICULTURAL COMMODITIES CANCELLED.

The law No. 18, 2000 imposing 10% value added tax on agricultural, animal husbandry and fishery commodities starting January, 2001 was finally cancelled by President Abdurrachman Wahid.

The cancellation was announced at a cabinet session in January. The decision caused a confusion among the customs authorities and importers and related business associations like GPMT, GAPPI, GPPU and PPUI. The decision was made after an agreement between the government and the parliament to review the controversial policy.

The law has trigered controversy. Under the law tax will be imposed on all consumers goods with the exception of strategic goods.

The controversy was also raised over the definition of strategic commodities. The animal husbandry directorate general pointed out that animal feed and basic materials have always been exempted from value added tax (VAT), but the definition became unclear with the expanded range of goods imposed with tax.

The animal husbandry directorate general claimed that animal feed is included in the category of strategic commodities as one of nine essential goods.

The feedmill association (GPMT) said if the 10% VAT was to be slapped on animal feed the prices of all goods needed by livestock breeders will increase automatically. The imposition of VAT will hit the animal husbandry sector, it said. Similarly the association of feedlot and meat producer (Apfindo) said imposition of the 10% VAT will cause an increase of up to 15% in the price of meat in the country.

Administration of VAT in the agricultural sector will be difficult as transaction among the farmers are often made unofficially.

Livestock sector threatened with bankruptcy

If the 10% VAT is to be implemented as originally scheduled, the livestock industry would not survive as local products of the sector would not be able to compete openly in the market against imported products. Currently the import duty on animal husbandry commodities is only 5% In other countries a high import duties of above 40% on the same commodities are maintained.

Meanwhile, the association of poultry farmers (PPUI) said the additional income expected from the imposition of the 10% VAT would not be greater than the benefit the government could gain by improving the prevailing condition of livestock industry.

The association said the loss as a result of monopoly and cartel system in poultry farm by large companies was at least Rp 2.6 trillion a year as against an estimated additional revenue of only Rp 310 billion from the imposition of the 10% VAT.

The loss was caused by distortion in the delivery price of day old chick (DOC) and the high price of feed.
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Comment:10% VAT ON AGRICULTURAL COMMODITIES CANCELLED.
Publication:Indonesian Commercial Newsletter
Article Type:Brief Article
Geographic Code:9INDO
Date:Mar 13, 2001
Words:431
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