The Indonesian Government will scrap its controversial 10 per cent value-added tax (VAT) on imported cattle following butcher strikes and mounting pressure from consumers and livestock industry representative bodies.

As reported by ABC Rural last week, the Government applied the revenue-raising tax to cattle imported from Australia, in a move which surprised everyone along the live export supply chain.

But on Friday, the Government's chief economics minister, Darmin Nasution, told reporters in Jakarta that cattle would once again be exempt from the VAT.

"We've asked the Finance Ministry to temporarily stop imposing the value-added tax because it has a tremendous impact on strategic food [stocks]," he said.

The Jakarta Globe described the decision to axe the newly introduced tax as the latest "policy flip-flop" by the Jokowi Government.

Speaking to ABC Rural on Friday, the Indonesian Meat Importers Association's Thomas Sembiring said the tax would have definitely hurt Indonesian consumers.

"There definitely would have be an increase in the price of beef [because of this tax]," he said.

"The price of live cattle from Australia is already quite high and that's why in West Java a few days ago the meat traders went on strike and for the whole day they did not sell any beef.

"The butchers went on strike, because they know the consumption of beef will decline [if the price of beef increases further]."

Mr Sembiring said a tax on cattle from Australia would have contradicted the Government's aim to bring down beef prices.

"The Minister for Agriculture is too obsessed with achieving self-sufficiency," he said.

"Even [without] the 10 per cent tax [on cattle], the beef price is already high, over 100,000 rupiah ($10) [a kilogram] ."

Mr Sembiring said the Government's "obsession" with self-sufficiency had also affected the price of other commodities such as rice and corn.

Local cattle have little impact on prices

Last year the Indonesian Government launched a fleet of livestock vessels to ship cattle into Java from outer islands, such as Nusa Tenggara.

Loading

Mr Sembiring said some cattle had arrived, but it was having no impact on the price of beef, and some traders did not want to buy local cattle.

Indonesian Beef Traders Association chair Asnawi has told local media that cattle from East Nusa Tenggara would not be able to meet demand in Jakarta.

He said that every day the capital city needed about 700 head of imported Brahman-cross cattle, which he said was the equivalent of 1,400 local cattle from Nusa Tenggara (NTT).

"From local cattle with an average weight of 125kg, the carcass yield is only 100kg. So if the Government wants to control the price of beef in Jakarta, they would need to bring in at least 1,200 head of cattle from NTT per day," he said.

The Jakarta Globe reported the government was expected to add two extra ports of call for its cattle vessels, in a attempt to source additional livestock from outer islands at lower prices.

It said the first two voyages of the livestock ship 'Camara Nusantara I' had "ended in disappointment," with Indonesian farmers reluctant to sell animals and traders in Java buying just 100 head of cattle from the vessel, which has a capacity of 500 animals.

Livestock export permits for April, the real concern

The Australian Livestock Exporters' Council is cautiously optimistic the Indonesian Government will scrap its tax on cattle, but admits its relying mostly on media commentary from Indonesia and is yet to receive official confirmation.

Chief executive Alison Penfold said of more immediate concern than the VAT on live export cattle, is the allocation of permits. Listen Duration: 6 minutes 53 seconds 6 m Listen Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Alison Penfold says there will be no cattle exported to Indonesia in April if the permit issue is not rectified ( Craig Zonca ) Download 12.6 MB

Earlier this year, Indonesia announced it would issue import permits three times a year, rather than the previous system of quarterly allocations.

The initial allocation for 2016 was 200,000, for the four months January to April.

However Ms Penfold said the Indonesian authorities have only released permits for three months and if this is not rectified, there will be no cattle exported from Australia in April.

"Frankly the more relevant issue for Australia right now is us seeking dispensation on the existing import permits to allow them to be valid for April, so we can export cattle out of Australia in April and have them delivered by the end of April," she said.

Ms Penfold said while the Ministry of Agriculture announced the allocation of 200,000 head for January to April, the Department of Trade is yet to process the regulation, so they could only issue permits for three months.

"This is the challenge we have when we have two different departments involved. " she said.

"So you have one department saying, 'here are your numbers for four months' and another saying 'here are your permits for three'.

"That at the moment leaves April without any permits and that is of serious concern to exporters.

"We are seeking urgent decisions to allow for this dispensation, for the permits to be valid during April.

"I have asked the Indonesian ambassador here is Australia to convey that to Jakarta, we have also raised it with the Department of Agriculture officials here and certainly with our customers in Indonesia.

"So I know while the tax is getting the headlines, it is the permits that are the [big] issue, and the one we are really focussed on."