Airlangga: Government Not Behind 12 Percent VAT Hike

Indonesia‘s VAT ‍Hike: Government Cites Legal mandate, Rolls Out Relief Measures

Jakarta, Indonesia – Indonesia’s Value Added Tax (VAT) is set⁢ to rise to 12% in 2025, ⁢a move ⁣the government ⁢insists is mandated by law, not a policy preference. Coordinating Minister for Economic Affairs Airlangga Hartarto emphasized that the increase, stipulated in the⁤ 2021 Harmonization of Tax Regulations Law, was a collective decision involving nearly all parliamentary factions.

“The VAT rate for next year is‍ determined⁤ by law, and that law was passed by almost all factions in the House of ⁢Representatives, accept for PKS,” Hartarto stated, speaking to reporters after accompanying Prabowo Subianto to Egypt.

Recognizing the potential impact ⁢on consumer purchasing power, the government has unveiled a series of incentives to⁢ cushion the blow. Thes include:

Food Assistance: 16 million families will receive 10 kilograms of rice per⁢ month, costing an estimated Rp 4.6 trillion.
Electricity Discounts: ⁤81.1 million PLN customers ⁢with power usage of 2,200 VA or less will‍ enjoy a 50% discount on their ⁢electricity bills for January and february 2025,requiring rp 10.8⁣ trillion in funding.

Protecting Essential Goods

In addition to these direct relief measures, the government has ⁤maintained a zero VAT rate on essential food items such as rice, corn, soybeans, sugar, fresh milk, meat, eggs, and fish.

Furthermore, to shield lower-income households, the 11% VAT rate will be retained for three crucial commodities: cooking oil, wheat flour, and industrial sugar. This is achieved through the VAT DTP incentive, where the government absorbs the 1% increase.

Targeted VAT Application

Hartarto clarified that while sectors like transportation, healthcare, and⁤ education are generally exempt from VAT, the new rate will ‍apply to ‍international schools (with annual fees typically exceeding Rp 70 million) and high-cost medical treatments paid ‍out-of-pocket.

The government’s approach ‍aims to balance the⁢ need for increased revenue with the imperative of‍ protecting vulnerable populations and ensuring economic stability.

IndonesiaS VAT Hike: A ⁢Balancing Act between Revenue and Relief

Jakarta,Indonesia – Indonesia’s value Added Tax (VAT) is set to⁣ increase to 12%⁣ in 2025,a move the government stresses is legally mandated,not a ⁤policy preference.‍ coordinating Minister for⁤ Economic Affairs airlangga Hartarto clarified that the increase, stipulated in the 2021 ⁣Harmonization ‍of Tax ⁢Regulations Law, reflects a collective parliamentary decision.

Acknowledging the potential‍ impact on consumer purchasing ‍power,the government has introduced a series of relief measures.⁣ These include:

Food Assistance: 16 million families will receive 10 kilograms of ⁤rice monthly,costing an estimated Rp 4.6 trillion.

electricity Discounts: 81.1 million PLN customers with power usage of 2,200 VA or less⁣ will enjoy a⁣ 50% discount on their ‍electricity bills for January and February 2025, requiring Rp 10.8 trillion in funding.

Protecting Essential Goods:

Maintaining a ‍zero VAT ⁢rate ⁣on essential food items such ⁤as rice, corn, ⁤soybeans, sugar, fresh milk, meat, eggs, and‍ fish. ⁢The 11% VAT rate will ⁢remain in place for cooking⁢ oil, ⁤wheat flour, and industrial sugar, benefiting lower-income households‍ through the ⁤VAT DTP incentive,‍ where the government absorbs the 1% increase.

Targeted VAT Submission:

While‍ sectors like transportation, healthcare, and‍ education‍ generally remain VAT-exempt, the new rate will apply ⁣to international schools⁤ with annual fees exceeding Rp 70 million and high-cost medical treatments paid out-of-pocket.

This approach aims to balance the need for increased revenue with protecting vulnerable ⁣populations and ensuring economic stability.