- Indonesia has reduced the planned increase in the country’s value added tax due to public dissatisfaction
- Originally, the VAT rate was set to rise to 12 percent on January 1, following a previous increase last year
- President Prabowo Subianto decided that the increase will now only apply to luxury goods already subject to a luxury tax
- This decision was announced after Prabowo attended the Finance Ministry’s year-end meeting
- The VAT rate for non-luxury goods and services will remain at 11 percent, and exemptions for basic necessities will continue
- Business groups and unions had urged postponing the VAT increase, citing concerns over low consumption and potential job losses
- Finance Minister Sri Mulyani Indrawati supports the hike to maintain the state budget’s health
- Prabowo’s administration aims to boost economic growth to 8 percent annually with increased spending on defense, civil servant salaries, and a nutrition program
- Despite public opposition, the Finance Ministry initially planned a general VAT increase but later focused on luxury goods following Prabowo’s announcement
- Additional relief measures for lower-income earners, including electricity discounts and tax breaks totaling 38.6 trillion rupiah, will proceed
- The scaled-back VAT increase will impact tax revenue, which is crucial as tax receipts make up about a quarter of the country’s total tax income
- The partial VAT increase is expected to raise tax receipts by approximately 3.2 trillion rupiah
Source: thediplomat.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
