CEO Message #54

Indonesian Discount Shopping Day

Wednesday, August 8, together with the Governor of South Sumatra, Mr. Alex Noerdin and the General Chairman of the HIPPINDO (Indonesian Shopping Center Renter Association) Mr. Budiharjo Iduansjah inaugurated the opening of the Indonesian Discount Shopping Day (HBDI) in Palembang. HBDI can also be interpreted as Happy Birthday Indonesia, because it is always held in August. For this time, HBDI is very special because it is held to succeed the 2018 Asian Games where we host.

The President requested that during the Asian Games take place there were massive price discounts at shopping centers throughout Indonesia, especially in Jakarta and Palembang. As well as welcoming 73rd Independence Day, the discount rate is deliberately made unique: the amount of the discount is up to 73%; provide a special price of IDR 73 thousand; and there are special discounts for those who are 73 years old.

For us, a big event like the Asian Games is a golden opportunity to bring tourists, especially foreign tourists. Therefore, as I have often said, sport tourism events cannot stand alone. To attract tourists, sports as an attraction are not enough. Supporting activities such as HBDI are required. We also prepared seven destinations and 75 tour packages to welcome the arrival of 170 thousand tourists from the Asian Games.

Regarding culinary tourism and shopping, I would rather say that Indonesia is not yet one of the countries that have become a shopping paradise, especially for tourists. Even though around the world around 30 to 40 percent of tourist spending is on culinary and shopping.

Why is that?

There are two factors that cause the shopping sector in Indonesia has not been exciting for tourists, namely regulation and technology. First, regulations that support shopping tourism need to be adjusted so that they can compete regionally and globally. Second, we must have the courage to carry out digital transformation by encouraging events like HBDI to use online technology.

Tax Refund

To encourage Indonesia to become one of the world’s shopping paradise policy on tax refund (tax refund system) for tourists shopping is important.

Branded products sold in Singapore, Japan or South Korea are far cheaper than malls in Jakarta, one of which is because the application of tax refund incentives in these countries is very effective. In Indonesia to get branded items with a tax refund scheme are only limited to duty-free shops or often known as Duty Free Shop, whose numbers are still limited. In other countries, tax exempt is given at any shop that participates in tax free by simply showing a foreign passport. In Japan, for example, since June 2018 tourists can get tax havens by showing a foreign passport when they buy consumer products, for example: food, cosmetics, alcoholic beverages (can be consumed while still in Japan) and general products such as jewelry, clothing, electronic goods (used after leaving Japan) with a shopping value of ¥ 5,000 (IDR 650,000) to ¥ 500,000 (IDR 66 million) in 1 day.

The Government has implemented a tax refund policy of 10 percent (regulated in Law No. 42 of 2009) since 2010 but it must be admitted that its implementation is still not encouraging. According to the Directorate General of Taxes, the number of tax refund applicants by foreign tourists in the last 3 years averaged only 1,000 applicants per year, which is still very small. Compared to Singapore, it is believed that the number of tax refund applicants reaches hundreds of thousands or millions of foreign tourists.

It is believed that the tax refund policy has been reviewed by the Ministry of Finance and it is believed that all HIPPINDO members are committed to registering as a Taxable Entrepreneur to obtain a tax refund scheme. Thus, the tax refund is truly an attractive tourist attraction for shopping.

There are several tax refund regulations that we need to review and update.

First is the relaxation of regulations by lowering the maximum cash refund limit at the airport or designated malls. The current provisions of one shopping invoice that can be refunded by foreign tourists (minimum spending) are IDR 5 million. I want this value to be reduced to only IDR 1 million. In a competing country, a shopping value equivalent to IDR 1 million can already be refunded. In Singapore for example, 100 Singapore dollars can already be refunded.

Second, the tax return process must also be simplified and simplified. Singapore is very good at doing this. In this country, tax refunds can be in the form of cash, checks, or attractive vouchers that encourage foreign tourists to visit again. They also implemented an electronic tax refund so that tourists no longer need to queue.

In addition, the tax refund claim time in Indonesia must also be extended. When the claim is valid now is 1 month after spending, I want this claim period to be extended to 3 months. The goal is that foreign tourists come back to Indonesia, if it’s okay to rush; he already has a lot of tax refund deposits can claim again.

Third, we must increase the number of PKP (Taxable Entrepreneurs) and PKP Stores so that the number of tax refund participants will increase, because in order to get a tax refund scheme, it must be a PKP status first.

Learn from Singapore

I often say, the easiest and fastest way to win the competition is by benchmarking. Regarding tax refunds, we have a lot to learn from Singapore. We know that Singapore is one of the shopping paradises in the world and reaping the success of one of them because of an effective tax refund policy.

Singapore has imposed a tax refund by applying GST (Goods and Service Tax) since 1994 at 3 percent to 7 percent. So every tourist who buys goods throughout Singapore and is subject to GST can make a claim to return the tax when the tourist will leave Singapore.

There are two GST refund operators, Global Refund and Premier Tax Free. The shops that work with these two operators usually put a sign “Tax Refund” or one of the logos of the GST operator. Tourists are entitled to exchange up to 3 of the same invoice from a store that has the same GST registration number to fulfill a minimum purchase of SGD100. In Singapore, the submission of GST returns must be made within two months after product purchase.

Stores or outlets that are not part of the GST refund program can run their own tax refund program. Each of these stores may have different policies from each other. For example, a tax refund can be in the form of cash, checks or attractive vouchers that make foreign tourists visit again.

To make it easier for foreign tourists to make tax returns the Singapore government imposed eTRS (The Electronic Tourist Refund Scheme). This eTRS helps tax refund services for tourists so that they do not need to fill in return forms issued by different stores, do not need to queue, and do not waste much time. In addition, eTRS is user-friendly with the use of many different languages.

HBDI Go Online

In addition to regulatory issues related to tax refunds, I also encourage HBDI to “go online”. The ease of shopping through digital technology is important to encourage foreign tourists to shop in Indonesia. Therefore I ask HBDI online to be a part of this annual event.

From the marketing side, online retail offers a myriad of advantages compared to traditional retailers such as: convenience, convenience, speed in finding information and making transactions. more competitive prices (more for less); and wider market reach. With these advantages, online retail has the potential to generate a much higher turnover.

Examples of successful online discount programs are International Singles Day (Single’s Day) in China and National Online Shopping Day (Harbolnas) in the country. International Singles Day held in November 2017 by Alibaba was able to set the highest sales record in the world at around USD 25 billion. Meanwhile,  Harbolnas, which was held in December 2017 involved more than 250 e-commerce, was able to score sales of up to IDR 4.7 trillion.

Some discount programs have also begun to develop an online presence to further boost sales. For example, the Garuda Indonesia Travel Fair (GATF). After successfully holding the GATF offline, since 2016 Garuda Indonesia began launching the Garuda Indonesia Online Travel Fair (GOTF) which can be accessed on various digital channels of Garuda Indonesia.

In history, I was the one who encouraged Garuda Indonesia management to also make GOTF in addition to GATF. Why? It’s because my first priority is to bring inbound tourists. With online presence, the discount promo can be accessed by travelers from abroad so that it will increase inbound tourists.

The results apparently exceeded expectations. If GOTF transactions in the first year of 2016 (1 event) reached IDR 106 billion, in 2017 (3 events) it jumped to IDR 524 billion or increased 5 times. This year the target is IDR 360 Billion (2 times), but I am optimistic that Garuda Indonesia can penetrate the transaction number of IDR 1 trillion.

With these various success stories, I now also encourage HIPPINDO to go online. Our retail entrepreneurs must have the courage to make the decision to survive and succeed in the era of digital disruption, meaning that they must be ready to carry out digital transformation.

I hope that with the various efforts above we hope to utilize the momentum of the Asian Games to attract as many foreign tourists and foreign exchange as possible.

Regards,

Dr. Ir. Arief Yahya, M.Sc.

The Minister of Tourism