The reduced tax is also to attract foreign tourists to the country.
Indonesia, in a bid to encourage its citizens to shop within the country instead of going overseas especially Singapore, has cut luxury tax by about 40% on branded items such as Gucci, Louis Vuitton and Hermes.
Indonesia’s Finance Minister Bambang Brodjonegoro said that many Indonesians preferred go on shopping sprees overseas because branded items sold in Indonesia were considered overly expensive because of the high luxury tax.
"If we lower the tax, people will no longer shop in Singapore," said Bambang.
The minister added that a low tax on luxury items would also draw foreign tourists to Indonesia.
The policy is part of a package to help bolster the rupiah and kick-start the sluggish economy, which is mostly fuelled by domestic consumption.
Luxury tax to be exempt or reduced include the following:
- Electronics – refrigerators, televisions, water heaters, video recorders, microwaves, washing machines, driers, air conditioning units for cars, cameras and projectors
- Sports items
- Equipment for fishing, golf, diving, surfing and shooting
- Music items – pianos and electronic equipment
- High-end branded items – perfume, bags, wristwatches, horse saddles, jewellery, footwear
- Home and office appliances: Carpets, chairs, cabinets, lamps, porcelain and floor tiles
Source: The Jakarta Post