An Indonesian industry group representing global mobile phone makers is warning that the plan to impose an import tax on high-end models could impact smartphone sales in the market by up to 50%.
The Indonesia Cellphone Association has argued that imposing a 20% value-added tax on smartphone sales retailing for over 5 million rupiah ($430) would bolster the black market for illegal phone sales and could reduce sales of legal phones by half, Reuters reported.
The government is considering the tax in order to protect domestic handset brands and slow the tide of smartphone imports. It is likely to be voted on after the new government takes office in October.
Reuters notes that the VAT would make Indonesia the most expensive country in Asia to buy an iPhone 5S.
Prior reports suggest that the government is also considering applying the value-added tax to all mobile phone imports.
The decision whether to introduce the VAT may influence Foxconn's decision whether or not to set up a manufacturing facility in Indonesia, and may prompt other foreign businesses to rethink their investments in the nation.