By putri@insightinnews.com
Finance Minister Sri Mulyani Indrawati has announced that the plan to increase the value-added tax (VAT) rate to 12 percent will proceed as scheduled next year. This decision aligns with Law Number 7 of 2021 concerning the Harmonization of Tax Regulations, which stipulates that the VAT will rise from 11 percent to 12 percent starting January 1, 2025.
"We have discussed this matter with all of you (Commission XI), and the law is in place; we need to prepare for its implementation," she stated during a working meeting with Commission XI of the Indonesian House of Representatives in Jakarta on Wednesday, November 12, 2024. However, Sri Mulyani emphasized the importance of providing clear explanations to the public regarding the reasons for the VAT increase to ensure understanding.
She clarified that the VAT increase is not a decision made lightly. It is necessary to maintain the health of the State Budget (APBN). "The implementation must be accompanied by proper explanations so that we can proceed. This is not a blind action; the health of the APBN must be preserved. At the same time, the APBN must be capable of responding to global financial crises," she remarked.
Furthermore, she elaborated that the plan for the VAT increase had been thoroughly discussed with Commission XI of the House of Representatives. During these discussions, there were debates due to concerns that this increase might further weaken the purchasing power of the public, which is already under strain. Additionally, Article 17, paragraph (3) of the HPP Law includes provisions allowing the VAT rate to be adjusted between a minimum of 5 percent and a maximum of 15 percent. "During our discussions, there was considerable debate on this matter, but we must maintain a counter-cyclical approach," she added.
Previously, Coordinating Minister for Economic Affairs Airlangga Hartarto indicated that the increase in the Value Added Tax (VAT) to 12 percent is set to take effect starting in 2025. Airlangga stated that the provisions regarding the VAT increase are outlined in the Harmonized Tax Law (UU HPP). "The law is clear (the VAT rate will rise to 12 percent in 2025)," he remarked during a meeting at his office in Jakarta on Thursday, August 8, 2024.
Airlangga noted that the VAT increase could indeed be postponed, as stipulated in the same provisions. The UU HPP specifies that the government has the authority to delay the VAT increase by issuing a government regulation, which would then be discussed with the House of Representatives (DPR) and incorporated into the Draft State Revenue and Expenditure Budget. The considerations for postponing the increase to 12 percent include the economic conditions of the public and the government's funding needs. However, Airlangga mentioned that, to date, there have been no discussions regarding regulations to delay the implementation of the VAT increase.
