The government will discuss the policy plan to increase Value Added Tax (VAT) to 12%. It has not yet been decided whether this policy will be implemented in 2025. On Wednesday (April 23, 2024), the Coordinating Minister for Economic Affairs stated that this issue will only be discussed within the framework of the State Budget (APBN). Currently, President Joko Widodo's government is discussing the 2025 Government Work Plan (RKP), which will serve as a reference for the government and parliament when discussing the draft 2025 State Revenue and Expenditure Budget (RAPBN). The increase of VAT to 12% is a mandate of the HPP Law passed by President Joko Widodo in October 2021, which requires VAT to be raised to 11% in April 2022 and further increased to 12% no later than January 1, 2025.
This plan to increase VAT has faced resistance from economists and businesspeople. With this increase, Indonesia would become one of the few ASEAN countries with the highest VAT rate. Economists worry that such an increase will further dampen the purchasing power of people who have not yet recovered from the pandemic. The Minister of Finance previously stated that the VAT increase to 12% is not a fixed plan, and even if the government and parliament agree, these provisions could change. The 12% VAT has already been discussed, including the political aspects of the HPP Law, and they have discussed and agreed on it, but will also respect the new government. The new government has the right to change previously agreed policies, and of course it will adjust according to the direction and policies promised during the election campaign. Therefore, if the VAT target remains at 11%, adjustments will be made later.
The government will discuss the policy plan to increase Value Added Tax (VAT) to 12%. It has not yet been decided whether this policy will be implemented in 2025. On Wednesday (April 23, 2024), the Coordinating Minister for Economic Affairs stated that this issue will only be discussed within the framework of the State Budget (APBN). Currently, President Joko Widodo's government is discussing the 2025 Government Work Plan (RKP), which will serve as a reference for the government and parliament when discussing the draft 2025 State Revenue and Expenditure Budget (RAPBN). The increase of VAT to 12% is a mandate of the HPP Law passed by President Joko Widodo in October 2021, which requires VAT to be raised to 11% in April 2022 and further increased to 12% no later than January 1, 2025.
This plan to increase VAT has faced resistance from economists and businesspeople. With this increase, Indonesia would become one of the few ASEAN countries with the highest VAT rate. Economists worry that such an increase will further dampen the purchasing power of people who have not yet recovered from the pandemic. The Minister of Finance previously stated that the VAT increase to 12% is not a fixed plan, and even if the government and parliament agree, these provisions could change. The 12% VAT has already been discussed, including the political aspects of the HPP Law, and they have discussed and agreed on it, but will also respect the new government. The new government has the right to change previously agreed policies, and of course it will adjust according to the direction and policies promised during the election campaign. Therefore, if the VAT target remains at 11%, adjustments will be made later.
