INDONESIA POSITION ON FRENCH "SOLIDARITY TAX"

UNCLAS SECTION 01 OF 02 JAKARTA 005242

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EIND EAIR AFIN APEC ID
SUBJECT: INDONESIA POSITION ON FRENCH "SOLIDARITY TAX"

REF: STATE 60006


1. (SBU) Summary. The Government of Indonesia (GOI) does
not support the French proposal for an internationally-
endorsed "solidarity tax" on air travel for development
funding (Reftel),nor does the GOI levy airline ticket
taxes for any other non-aviation purpose, according an
official at the Ministry of Transportation (MOT).
Indonesia funds airport operations through taxes ranging
from Rp 30,000 (USD 3.40) for domestic departures to Rp
100,000 (USD 11) for international departures. Indonesian
citizens and foreign non-diplomatic residents must make a
Rp 1 Million (USD 114) income tax "prepayment" every time
they travel outside of the country by air. Revenues from
this tax are not allocated to a specific sector and flow
into the central budget. Indonesia has no dedicated taxes
to fund tourism, and taxes are not generally designated
from a specific sector to fund specific development
projects. End Summary.

Indonesia Does Not Support Airport Tax
--------------


2. (SBU) We met with Lilien Ambarwiyati, Deputy Director,
International Air Transport, Directorate General of Air
Communications in the Ministry of Transportation (MOT) on
April 18 regarding the French proposal seeking APEC support
for an airline ticket tax to support development.
Ambarwiyati stated that the GOI and airlines in Indonesia
would not support the French proposal, especially since the
cost of airline tickets is already expensive for the
average Indonesian passenger, and the tax would unfairly
burden the airline industry. Ambarwiyati said she first
learned of the French proposal following the APEC
conference in Korea last year, when the Ministry of Finance
(MOF) sought an opinion on the matter from the MOT.
Minister of Transportation Hatta Rajasa responded with a
letter to the MOF opposing the measure. However,
Ambarwiyati was uncertain whether the GOI has taken a
public position on the issue.


3. (SBU) When we described the reasons the U.S. opposes
the tax, Ambarwiyati replied that "it seems the U.S. and
Indonesia agree on this." She also noted that during the
ASEAN Air Transportation Committee meeting last year,
members informally shared similarly negative views of the
proposal. However, ASEAN members Vietnam and Thailand
nonetheless signed the declaration last September in
support of further work on a "solidarity contribution".

Current Taxes Related to Travel
--------------


4. (SBU) Indonesia has a departure tax at its airports to
help finance operations. Amounts vary from airport to
airport and are most expensive at Jakarta's Soekarno-Hatta
International Airport (Rp 100,000 or USD 11 for
international, Rp 30,000 or USD 3.40 for domestic).
Revenues from the tax go to the MOT. In addition,
Indonesia has a visa-on-arrival charge for tourists of USD
10 for a three-day visa and USD 25 for a 30-day visa, which
must be paid in U.S. currency. Indonesian citizens and
non-diplomatic foreign residents must also make a hefty Rp
1,000,000 (USD 114) income tax "prepayment" known as
"fiskal" when they travel internationally by air. This
means that an airline ticket to neighboring Malaysia, for
example, can be less expensive than the departure tax.
Before the riots of 1998, the departure tax was Rp 250,000
(about USD 28 at today's exchange rate). Former President
Soeharto imposed the tax during this troubled time to
discourage departures from the country. Subsequent
administrations did not lower the tax. Indonesia's high
departure tax means that some choose to travel to
neighboring Singapore or Malaysia by ferry via the
Indonesian port of Batam, where the departure tax is only
Rp 50,000 (USD 57).


5. (SBU) Revenues from departure tax and visa-on-arrival go
through the Directorate General of Immigration, under the
Ministry of Law and Human Rights and eventually make their
way to the central GOI budget. Indonesia has no dedicated
taxes to fund tourism, and the GOI does not generally
dedicate revenues from individual taxes to specific
development projects.


6. (SBU) Comment: Additional taxes on air travel would be
a blow to Indonesia's already ailing tourist sector, which
has declined significantly in the wake of the October 2005
Bali bombing and rising concerns about avian influenza. As
a relatively junior deputy director, Ambarwiyati will not

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control the final decision on this issue. However, she
does wield significant influence as the lead official at
the MOT over the fee structure of international air
transportation.

PASCOE