Jakarta – Starting January 1, 2025, the government has officially implemented an adjustment to the Value Added Tax (VAT) rate as mandated in Law Number 7 of 2021 concerning the Harmonization of Tax Regulations (UU HPP). This step is believed to strengthen fiscal stability and increase national economic equality.
The General Chairperson of the Indonesian Tax Consultants Association (IKPI), Vaudy Starworld, said that the 1 percent increase was an effort to optimize state revenue with minimal impact on the economy. In an academic seminar entitled “Meet Old Tax Law, Greet New VAT 12%” at Pelita Harapan University, he explained that this policy is focused on consumption, not production.
“The 1 percent increase in VAT will boost the tax ratio, especially from the household sector which dominates the contribution to GDP,” said Vaudy.
He also added that a new administration system, the Core Tax Administration System (SIAP), will be implemented by the Directorate General of Taxes starting next year to improve taxpayer compliance.
The Head of the Fiscal Policy Agency of the Ministry of Finance, Febrio Kacaribu, revealed that this tariff adjustment has the potential to increase state revenues by up to IDR 75 trillion. The government ensures that this policy remains based on the principle of justice, by continuing various tax incentives such as VAT exemptions for staple foods, health services, and education.
“The principle of justice is applied by ensuring that vulnerable communities are protected, while communities are able to contribute according to their abilities,” Febrio emphasized.
He also added that next year’s tax incentives are projected to reach IDR 265.5 trillion, with the largest allocation for the food and MSME sectors.
Economic observer Pieter C. Zulkifli assessed that the 1 percent increase in VAT rates is a strategic step to increase state revenues in order to achieve the economic growth target of 8 percent.
However, Pieter reminded the importance of the sustainability of social assistance programs to maintain people’s purchasing power. This was agreed by Bank Permata’s Chief Economist, Josua Pardede, who suggested providing additional incentives for MSMEs to remain competitive amid the impact of this policy.
Despite the challenges in its implementation, the policy of increasing VAT by 1 percent is expected to strengthen Indonesia’s fiscal foundation. The government continues to listen to the aspirations of the people and design policies that not only support state revenues but also encourage economic equality.
Thus, increasing the VAT rate to 12 percent is not only a strategic step for fiscal stability, but also a manifestation of the government’s commitment to realizing a more inclusive and equitable economy.
