Malaysia the big winner in Indonesian decision to remove exit tax?


From January 1 this year all Indonesian residents (local as well as expatriates) who are registered with the Tax Department through their NPWP no longer have to pay Rp1 million fiscal or exit tax each time they leave Indonesia. Conversely, those who do not have a NPWP registration will have to pay Rp2.5 million fiscal.

The tax laws are such that most working professionals would have a NPWP number by now. This being the case it is an interesting thought experiment on how the removal of fiscal payments would affect domestic tourism in Indonesia.

Unspun suspects that there is a huge number of Indonesian professionals who are comfortable but who are not well off who in the past thronged to Bali for their holidays because they could not or did not want to incur the extra Rp1 million fiscal if they went overseas instead.

But now, with the fiscal removed the rules of the game are changed. Would Bali still beckon to them, or would they flock to somewhere else instead for a change? Nobody seems to have investigated this in depth but Unspun thinks a huge proportion of them will fly elsewhere.

Of all the destinations made more accessible by the new tax law Malaysia stands to be the biggest winner if its Tourism Ministry can take advantage of the situation.

The reason is simple. Two destinations now are as cheap to fly to as Bali for the Indonesian in Jakarta – Singapore and KL. Singapore (at an exchange rate of S$1- Rp 7,500 or so), however, has gotten very expensive for Indonesians. On the othr hand, terms of hotels, KL is probably cheaper than Bali and travel and food costs there are about par and perhaps a little lover than Bali. What’s stopping many Indonesians from going there is a negative perception that Malaysians are negatively pre-disposed toward Indonesians. If that can be corect and Malaysia can let Indonesians know that they are welcomed there, it would see a great influx of the middle to lower middle market of Indonesian tourists.

It would be interesting too to wonder what the tourism industry in Bali would do as a reaction to this potential threat? Bali has great natural resources but development there is not planned well. It is also not competitive in terms of value for money. So what will they do?

3 Comments Add yours

  1. Alaksir says:

    I’m not sure that most working professionals have their own personal NPWP. Is that really the case now? To my knowledge, most people used to pay their income tax through their employer, which means there was never much incentive for them to register their own NPWP, and I think this is what the exit or fiskal tax exemption is supposed to address.

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  2. Farid says:

    Alaksir is right in a way. Most of PNS moved around a lot and they sometimes don’t even know their NPWP number or it get lost along the way. But their income tax are deducted whichever way. I met a teacher who moved from Balikpapan to Bontang and she couldn’t find her NPWP number in BPN Pajak office.
    Secondly, lots of Indonesians are small-time entrepreneuers. They were able to go overseas every 2-3 years previously. Now with the increase in fiskal, they’re sighing to me on the newly-imposed difficulties.

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  3. plainwords says:

    I think hotel charges is either cheaper or fairly the same with KL. Don’t forget food and transport in Bali is considerable cheaper comparative to KL and Singapore. I don’t think Malaysia is a big winner from all of this as you would try to over stress in your healine but all Asean is, and those that manage to market their tourism well will receive a nice share of the what could be a new market. Fiskal or not I think a lot of Indonesians have always treated visiting neighboring countries as weekend getaways but never for long stays so this new initiative to get people to register their NPWP would increase people going out of Indonesia for a holiday but I don’t think it will hurt places like Bali and Bandung as those are pretty much places that offer more of a local feeling and familiarity to most Indonesian.

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