Coordinating Minister for the Economy : 1% VAT Increase, Government Only Follows Mandate of Law
Jakarta – Coordinating Minister for the Economy, Airlangga Hartarto said the government is only following the mandate of the law regarding the 1 percent VAT increase. The increase in the value added tax (VAT) rate from 11 percent to 12 percent is not the government’s wish.
“The government is only following the mandate of Law Number 7 of 2021 concerning Harmonization of Tax Regulations (UU HPP). Article 7 paragraph 1 of the HPP Law states that the 12 percent VAT rate will apply no later than January 1, 2025,” said Coordinating Minister for the Economy Airlangga when met by the media in Jakarta.
Airlangga said, to anticipate the increase in VAT rates, the government has issued a series of incentive packages for next year so that people’s purchasing power is maintained.
Two of them are in the form of food assistance and a 50 percent electricity tariff discount during January-February 2025. Food assistance is provided for 16 million families, where each family gets 10 kilograms of rice per month. The budget needed for this incentive is around IDR 4.6 trillion.
In addition, the government will cover the needs of other food items that are subject to 12 percent Value Added Tax or VAT, namely 1 percent for low-income people.
Meanwhile, Minister of Finance, Sri Mulyani Indrawati said the government will cover the increase in value added tax (VAT) of 1 percent for three commodities when 12 percent VAT is implemented on January 1, 2025. The three commodities are wheat flour, sugar for industry, and people’s cooking oil or MinyaKita.
On the other hand, the government’s decision to increase the Value Added Tax (VAT) rate to 12 percent will be followed by more socialization and explanation to the public. This is needed as an affirmation that the government is not careless in formulating and implementing policies related to taxation, concluded Finance Minister Sri Mulyani.
The policy on taxation, including VAT, does not mean being blind and as if it has no attention to several sectors such as health, education, and even staple foods, she explained.
The government has prepared an economic stimulus package targeting six aspects, namely households, workers, MSMEs, labor-intensive industries, electric and hybrid cars, and property. The stimulus package is designed to be as comprehensive as possible to be able to provide a balance between economic data and input from various parties, she concluded.
