Heaptalk, Jakarta — Indonesia’s government plans to increase the Value-Added Tax (VAT) to 12% in 2025. According to Indonesia’s Coordinating Minister for Economic Affairs, Airlangga Hartarto, this regulation will increase state income from the tax sector.
“Our target is, of course, to increase state income from taxation. We will discuss this plan and its implementation within the State Budget (APBN) framework.” Minister Airlangga said.
In his further statement, Airlangga also said that tax revenues could be increased through the Core Tax Administration System (CTAS) from the Directorate General of Taxes (DJP) Ministry of Finance, which refers to the types of taxes focusing on collecting state tax revenues, such as VAT, Income Tax (PPh), Land and Building Tax (PBB), Corporate Tax (Corporate PPh), and Luxury Goods Sales Tax (PPnBM).
The system is claimed to replace the old Directorate General of Taxes Information System (SIDJP) and is expected to be implemented optimally.
“The current strategy is not to collect VAT but to collect tax income. With implementing a better system, especially regarding the core tax system, we expected that this system would be implemented optimally,” Airlangga said.
As is known, the HPP Law, which President Jokowi passed in October 2021, mandates the VAT development of up to 12%. This regulation commands VAT to elevate to 11% in April 2022 and bump to 12% no less than on January 1st, 2025.
In response to this matter, Deputy Director of the Institute for Development of Economics and Finance (INDEF) Eko Listiyanto said regulatory considerations regarding the increase in tax value by 12% must adjust to the current economic context and situation. Moreover, he saw that economic growth would only be able to grow around 5.11% in Q1 2024.
Moreover, as cited in Kompas, Eko conveyed that Indonesian society’s purchasing power remains relatively miserable, as evidenced by the percentage of household consumption value, which only touched 4.9% in the first quarter (Q1) of 2024.
Besides the lower household consumption, he admitted that the government should consider weakening the rupiah exchange. With these existing challenges that still need to be well-resolved, he estimated that regulating a tax increase of 12% would be an oversight in accomplishing the country’s economic growth target.
