Indonesia Implements VAT Increase to 12% with Consumer Incentives

• Indonesia will increase the VAT rate to 12 percent starting January 1, 2025
• Essential staples like rice, beef, fish, and vegetables will remain exempt from VAT
• The government will absorb an additional 1 percent VAT on certain staples like flour and cooking oil temporarily
• To mitigate the VAT impact, the government will provide 10 kilograms of rice monthly to 16 million low-income households for two months
• Households with electricity usage up to 2,200 volt-amperes will get a 50 percent discount on power bills in January and February
• A partial VAT waiver on certain house purchases will continue until mid-2025 and then be reduced by 50 percent
• Tax incentives will be offered for electric vehicle purchases and income tax cuts for qualifying workers
• Luxury food items and high-end services will now be subject to the new 12 percent VAT rate
• The incentive package is estimated to cost IDR 30-40 trillion while the VAT hike could generate IDR 75 trillion in additional revenue
• The previous VAT increase from 10 to 11 percent in April 2022 had minimal economic impact
• Economists express concerns about the timing of the VAT hike due to the global economic slowdown and weaker purchasing power

Source: borneobulletin.com.bn

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.

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