Indonesia threatens BlackBerry tax hike over Malaysia move

If you had been following my tweets yesterday or read the news online elsewhere you would have known that the Indonesian government is planning to exact revenge on Research In Motion (RIM) for setting up manufacturing operations in Malaysia by imposing additional tax on imported BlackBerry devices.

Indonesia and its government has long held strong animosity towards Malaysia despite or perhaps due to the shared heritage and culture. Claims of theft over cultural aspects and the arts have long been a sore point between the two countries and this latest decision by RIM only adds to that long list of reasons.

Indonesia is a massive market for RIM. Its one of the few countries in the world (if not the only one) in which BlackBerry devices outsell both iPhone and Android phones combined. The BlackBerry in this country is not seen as a business device but instead it is primarily a social device.

Whether you like it or not, the BlackBerry Messenger remains the primary tool for the middle and upper classes to communicate with each other. It has taken over SMS for those who have the device. Many of those who don’t have a BlackBerry settle for something that look similar enough so they can look like and pretend as if they’re using RIM’s devices.

Recently the Canadian company decided to set up a manufacturing plant in neighboring country Malaysia despite the devices being much more popular in Indonesia. As Malaysians prefer to go with non BlackBerry phones, it becomes a curious point to some as to the reasons behind the decision.

Gita Wirjawan, chief of Indonesia’s Investment Coordinating Board posed that very question as he reacted in dismay over RIM’s choice. He asked, “why did they choose to build in Malaysia?” He cited Malaysian sales figure of BlackBerry devices which comes in at around 10 percent of sales in Indonesia.

RIM was forced by the Indonesian government last year to set up an office in the country and provided service centers following an explosion of sales in the last few years. It also demanded RIM to handle service and repair requests for its devices which had been imported even without RIM’s authorization. In other words, BlackBerry service centers are expected to deal with authorized as well as unauthorized imports.

RIM was also required to comply with the government’s censorship scheme to restrict pornographic content over Indonesia’s data connections and to open its otherwise protected network to authorities  for any lawful interception request over criminal investigations. The government additionally demanded the company to build a data center in the country which would comply with local laws and regulations to facilitate the aforementioned requests.

With the support of the country’s Industry Minister M.S Hidayat, Wirjawan is now proposing additional tax over products that are imported instead of manufactured locally. Hidayat said that the government should penalize companies whose imported products hold large market shares.

The Jakarta Globe quoted Hidayat saying, “I suggest we impose an additional value-added tax or luxury tax for such goods so that people would choose to invest here instead.”

The Globe noted that the Tax Law has a provision to allow the imposition of such a penalty over products used by the affluents whose numbers are very limited in comparison to the rest of the demographics. This proposal is still in the very early stage and won’t be implemented for a while yet.

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