By: Justin Bahar
The Indonesian government continues to demonstrate its commitment to maintaining economic stability and public welfare amidst changes in tax policy. Starting next year, the Value Added Tax (VAT) rate will be adjusted to 12 percent in accordance with the mandate of Law Number 7 of 2021 concerning Harmonization of Tax Regulations (HPP). However, the government is not standing still in the face of the potential impacts of this policy. Various economic stimuli have been designed to mitigate the impact of the increase in VAT, which aims to protect the public and support the sustainability of the national economy.
Coordinating Minister for Economic Affairs, Airlangga Hartarto, stated that this step is part of the government’s efforts toto maintain a balance between optimizing state revenue and protecting the community. According to him, the community’s welfare is maintained, the government has prepared incentives in the form of an Economic Stimulus Package that will be given to various classes of society. This stimulus covers various strategic sectors, ranging from support for small and medium enterprises (SMEs) to protection of labor-intensive industries.
The policy package prepared by the government is designed to be inclusive, targeting various income groups, from low-income to middle and upper-income people. Researcher at the Center of Reform on Economics (CORE) Indonesia, Yusuf Rendy Manilet, assessed that the government has tried to formulate an inclusive economic stimulus to mitigate the impact of the increase in VAT rates. In general, the government is trying to ensure that the stimulus provided is inclusive and targets all income groups.
This stimulus also includes various strategic policies such as price subsidies for basic necessities, fiscal incentives for MSMEs, and easy access to financing for strategic sectors. With this policy, the government seeks to ensure that people’s purchasing power is maintained, especially for vulnerable groups who are most affected by the increase in VAT rates.
One of the important elements in this policy package is support for business actors, especially MSMEs and labor-intensive industries. In conditions where the business world is still facing post-pandemic challenges, this incentive is expected to provide space for business actors to remain productive. The stimulus in the form of tax relief, credit interest subsidies, and support for MSME digitalization programs is real evidence of the government’s attention to the sustainability of the business world.
Director of the Center of Economics and Law Studies (Celios), Bhima Yudhistira, appreciated the government’s steps in designing a fairly comprehensive economic stimulus to maintain people’s purchasing power. However, he also provided important notes regarding the need for additional supporting policies. According to him, in general, the economic stimulus provided by the government is designed to be comprehensive enough to maintain purchasing power amidst the increase in VAT. However, to anticipate long-term impacts, the government needs to consider extending the stimulus or other supporting policies.
Although the stimulus designed has covered various aspects, the effectiveness of policy implementation remains the key to success. The government needs to ensure that all stimulus distribution mechanisms run transparently and on target. In addition, good coordination between the central and regional governments is very important to ensure that this policy can be felt evenly by the entire community.
The response of the community and the business world to the change in VAT rates is also a determining factor in the success of this policy. In the short term, support from various parties, be it business actors, academics, or the general public, will greatly assist the government in achieving the target of sustainable economic growth.
The adjustment of the VAT rate to 12 percent is not merely a step to increase state revenue, but also part of a broader effort to harmonize tax regulations. With the implementation of inclusive policies and targeted stimulus, the negative impact of this rate increase is expected to be minimized. Furthermore, this policy is expected to be able to encourage better economic growth in the future.
In a global context, Indonesia’s steps in managing changes in tax policy also reflect a commitment to maintaining economic stability while increasing competitiveness. With holistically designed stimulus, the government seeks to provide protection for the community, support the business world, and encourage acceleration of national economic growth.
Ultimately, the success of this policy requires support from all elements of society. The VAT rate adjustment policy is not a stand-alone effort, but rather part of the government’s strategic steps to create a stronger, more inclusive, and sustainable economy. By supporting this policy, we contribute to maintaining national economic stability and realizing prosperity for all Indonesian people.
)* The author is an Observer of Economic Issues from the Prosperous People’s Forum
