Indonesia Plans to Cut Import Taxes and Export Levies to Boost Trade Talks

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JAKARTA, investortrust.id – The Indonesian government has announced plans to reduce import taxes and export levies in a bid to stimulate trade and ease tensions with key partners. The reductions, which include import value-added tax (VAT), import duties, and income tax on imports, are expected to apply broadly, while export levies on crude palm oil will also be lowered.

Coordinating Minister for Economic Affairs Airlangga Hartarto said the Ministry of Finance is finalizing a proposal to lower the import VAT rate from all countries, not just the United States. "This is being drafted by the Ministry of Finance and will apply generally," Airlangga stated on Monday, April 14, 2025, at his office in Jakarta.

Under the current system, imported goods are subject to several charges including import duties (0–150% based on the HS code and calculated from the CIF value), VAT at 11%, and Article 22 import income tax, which typically stands at 2.5% for taxpayers with registration and up to 7.5% without. Additional levies may apply depending on the product type, such as excise duties or luxury goods taxes, which can reach as high as 125%.

For example, importing electronic goods with a CIF value of Rp 100 million currently results in a total tax burden of around Rp 24.6 million, based on prevailing tariffs.

Strategic Context: Upcoming U.S. Trade Negotiations

Indonesia’s tax relief proposals come ahead of high-level negotiations with U.S. trade officials scheduled for April 16–23, 2025. The delegation, appointed by President Prabowo Subianto, will engage with the U.S. Departments of Commerce, Treasury, and State.

Airlangga said the move is a direct response to longstanding concerns from the United States regarding its trade deficit with Indonesia, which has reached US$18–19 billion annually. Former President Donald Trump has criticized Indonesia’s high import taxes and non-tariff barriers as contributing factors.

“Even though average import tariffs are around 5%, their concern lies more in the VAT and non-tariff barriers,” Airlangga noted.

Policy Shift to Address Tariff Reciprocity

Head of the Fiscal Policy Agency, Febrio Kacaribu, revealed that the government is including the cut in Article 22 import income tax in its negotiation strategy to counter the U.S. decision to impose a 32% reciprocal tariff on Indonesian goods. This U.S. measure, currently on a 90-day suspension since April 9, 2025, is a central point of contention.

“We are offering this as part of our diplomatic package,” Febrio said after attending an economic forum with President Prabowo on April 8.

He added that regulatory reform would also be part of the strategy to enhance Indonesia’s negotiating position. "We are showing our commitment to reform taxation, customs, and business facilitation regulations," he said.

Import Income Tax to Drop to 0.5%

Finance Minister Sri Mulyani Indrawati confirmed the government’s commitment to overhaul tax administration and reduce tariffs for selected imported goods. Specifically, the Article 22 income tax rate will be reduced from 2.5% to 0.5% for certain U.S. products.

“For some products that were previously subject to 2.5%, we will adjust them to 0.5%,” she stated.

The former World Bank Managing Director emphasized that the government would also lower the import cost range from 5–10% to 0–5% for products originating from the United States under the most-favored-nation category.

Export Levy Relief for Palm Oil

Indonesia also plans to adjust export levies on crude palm oil, its key commodity export. The new structure is designed to effectively reduce the cost burden by up to 5%, signaling a broader effort to make Indonesian exports more competitive amid ongoing global scrutiny.