Jakarta – The government has officially canceled the plan to implement a 12% Value Added Tax (VAT) for non-luxury goods and services, which was originally planned to come into effect on January 1, 2025. This decision was conveyed directly by President Prabowo Subianto in a press conference at the Ministry of Finance Building, Jakarta, Tuesday (31/12).
President Prabowo emphasized that the increase in VAT will only apply to goods and services that are classified as luxury goods, such as private jets, yachts, and very luxurious houses in accordance with the Regulation of the Minister of Finance Number 15 of 2023. For goods and services other than those included in this category, the VAT rate remains at 11%.
“My commitment is to always side with the people, national interests, and fight and work for the welfare of the people. Therefore, as I have conveyed and coordinated with the DPR, today the government has decided that the VAT rate from 11% to 12% is only imposed on luxury goods and services,” Prabowo said.
The decision ends the tug-of-war over the VAT rate hike that has been a hot topic since early December. The President emphasized that the policy aims to protect people’s purchasing power, encourage economic equality, and show his support for the people.
Economic observer from the Center of Economic and Law Studies (CELIOS), Bhima Yudhistira, said that this step shows the government’s concerns ahead of President Prabowo’s 100th day in office.
“Prabowo wants to show again that he is the president who has a pro-people mandate, don’t be disturbed by contradictory policies,” said Bhima.
In addition, the government also announced a number of stimulus packages for the community totaling Rp38.6 trillion. The stimulus includes 10 kilograms of rice assistance for 16 million recipients during January-February 2025, a 50% electricity discount for household customers with a power of 2,200 volt ampere (VA), and Income Tax (PPh) 21 incentives for workers in labor-intensive sectors with salaries of up to Rp10 million per month.
Finance Minister Sri Mulyani ensured that the increase in VAT would not burden the general public.
“Other goods and services that have been subject to 11% VAT have not increased to 12%. So it remains 11%,” Sri Mulyani explained.
This decision is expected to create a fairer and more pro-people taxation system, while maintaining economic stability amidst global challenges full of uncertainty. {#}