Jakarta,– The government has announced a plan to implement an increase in Value Added Tax (VAT) to 12 percent which will be effective on January 1, 2025. This policy was taken as part of the mandate of Law Number 7 of 2021 concerning Harmonization of Tax Regulations (UU HPP) which stipulates that the 12 percent VAT rate must be implemented no later than the beginning of next year.
Finance Minister Sri Mulyani Indrawati explained that the government is committed to covering the increase in VAT on three basic commodities, namely wheat flour, sugar for industry, and people’s cooking oil (MinyaKita). The government will provide a 1 percent subsidy on these commodities to maintain people’s purchasing power, especially the low-income group.
“The increase in VAT rates was not done carelessly. We ensure that this policy is formulated by considering the balance between the country’s fiscal needs and protection of vital sectors such as health, education, and basic community needs,” Sri Mulyani emphasized.
On the other hand, Coordinating Minister for Economic Affairs Airlangga Hartarto emphasized that the increase in VAT rates is not entirely the government’s desire, but rather an obligation regulated in the HPP Law. The government has also prepared various economic stimuli to support the implementation of this policy. The stimulus covers six strategic aspects: households, workers, MSMEs, labor-intensive industries, electric vehicles, and property.
“We ensure that low-income people remain protected. In addition, the government will cover other food needs subject to 12 percent VAT by 1 percent,” said Airlangga.
Minister of Micro, Small, and Medium Enterprises (MSMEs) Maman Abdurrahman added that the increase in VAT actually provides significant benefits for the MSME sector. Of the total Rp265 trillion in incentives prepared related to this policy, around 90 percent will be enjoyed by MSME actors. This is expected to be able to encourage economic growth at the grassroots level.
The government will also intensify socialization to the public so that they understand the reasons and benefits of this VAT increase. With these steps, the government is optimistic that this policy can support economic stability without sacrificing public welfare.
With a comprehensive approach and support from various parties, it is hoped that this increase in VAT can be a strategic step to strengthen the country’s fiscal resilience while encouraging inclusive and sustainable economic development.
