Luxury Goods Tax Increase as a Step to Strengthen the State Economy
Jakarta, – The Indonesian government has confirmed the increase in the Value Added Tax (VAT) rate to 12 percent, which is implemented through Law Number 7 of 2021 concerning the Harmonization of Tax Regulations (UU HPP). Although there are a number of concerns, the government ensures that this policy is implemented for the long-term welfare of the community and the country’s fiscal sustainability.
According to the Coordinating Minister for the Economy, Airlangga Hartarto, the increase in the VAT rate to 12 percent is not the government’s will, but rather a mandate regulated in the HPP Law. “Article 7 paragraph 1 of the HPP Law states that the VAT rate of 12 percent will apply no later than January 1, 2025,” explained Airlangga. Thus, this policy is not a unilateral decision, but is part of the legal provisions that must be complied with.
Airlangga added that the government is committed to covering the needs of food that is subject to 12 percent VAT, especially for low-income people. “The government will cover other food needs subject to 12 percent VAT, which is 1 percent for low-income people,” he said. This step was taken to ensure that the policy does not burden more vulnerable groups in society.
Head of the Ministry of Finance’s Communication and Information Services Bureau, Deni Surjantoro, stated that the VAT rate adjustment policy had gone through very in-depth discussions between the Government and the House of Representatives (DPR). “The 1 percent VAT rate adjustment policy has gone through in-depth discussions between the Government and the DPR, and of course has considered various aspects, including economic, social, and fiscal,” said Deni. This mature process shows that the decision was not only based on technical considerations, but also took into account social balance and its impact on the economy.
Meanwhile, Deputy Speaker of the Indonesian House of Representatives, Sufmi Dasco Ahmad, emphasized that the 12 percent VAT increase would be applied selectively. “12% VAT will be imposed only on luxury goods that are selective. For basic goods and those related to services that directly affect the community, the 11% tax will still apply,” he said. This explains that goods that are basic necessities for the community will not be significantly affected by this tariff increase.
Support for this VAT increase policy is expected to strengthen the country’s economy by increasing fiscal revenues which in turn are used to improve infrastructure and public services. Through this policy, the government also shows its seriousness in maintaining a balance between economic development and protection for more vulnerable groups in society.
With this step, Indonesia hopes to strengthen the foundation of a more stable, inclusive, and sustainable economy.
