By: Feronika Jasin )*
After adjusting the Value Added Tax (VAT) rate by 1 percent, the government has prepared a number of strategic steps to reduce the economic impact on the community. This policy was taken as part of an effort to improve the country’s fiscal sector, but it is expected to provide additional burdens for consumers and certain sectors.
In facing the potential negative impacts of the VAT adjustment, the government is aware of the importance of providing stimulus to maintain people’s purchasing power. Some of the planned steps include increasing the budget for social programs that can be directly felt by the lower middle class. With this stimulus, it is hoped that the burden borne by consumers can be minimized, and economic growth will be maintained.
The statement by Finance Minister Sri Mulyani Indrawati regarding the 2025 tax incentives, which will mostly be enjoyed by households and business actors, including MSMEs, shows the government’s concrete efforts to create a balance between the country’s fiscal needs and the sustainability of the community’s economy.
The government realizes that households, especially those in the lower middle class, are the driving force of the national economy. The impact of the COVID-19 pandemic and global economic uncertainty have eroded people’s purchasing power, which has a direct impact on the consumption of goods and services. In this context, tax incentives directed at households are a very appropriate step. By providing tax relief or tax refunds, the government provides space for people to adjust their household budgets, while encouraging consumption which in turn can support economic recovery.
In addition, special attention is also given to sectors that are expected to be more affected by the VAT adjustment. The government is formulating an incentive scheme for small and medium enterprises (SMEs), so that they can survive and adapt to the new tax rate changes. Provision of targeted direct cash assistance (BLT), as well as subsidies for basic necessities are also part of the stimulus that will soon be rolled out.
As part of the broader fiscal policy, the government is also considering other possible adjustments that could affect people’s purchasing power. One option being considered is strengthening skills training and education programs to improve the quality of human resources, so that people can be more competitive and ready to face the challenges of the job market.
Indonesian Development of Economics and Finance (INDEF) Economic Researcher Ariyo Irhamna said that the 1 percent VAT rate adjustment opens up a discussion space regarding the impact of the policy on the Indonesian economy. Although it seems simple, the 1 percent VAT rate adjustment is estimated to provide a significant contribution to state revenue, even reaching tens of trillions of rupiah.
In the context of state finance, the adjustment of VAT can be seen as an effort by the government to optimize tax revenue. By estimating that this increase can increase state revenue by tens of trillions of rupiah, the government certainly hopes to overcome the budget deficit which is still a major challenge in national development. A larger source of revenue from VAT can be used to finance various development programs, ranging from infrastructure, education, to health which are greatly needed by the community.
On the other hand, a number of policies that facilitate access to financing are also the focus of attention. The Head of the Fiscal Policy Agency of the Ministry of Finance, Febrio Kacaribu explained his belief that economic growth in 2025 will still reach the APBN target of 5.2 percent despite the adjustment of the VAT rate, which is worth noting.
Febrio asserted that the 1 percent VAT adjustment policy would not have a significant impact on inflation. Although this is an optimistic view, the challenges in realizing this prediction cannot be underestimated. Especially in the context of the Indonesian economy which is full of global uncertainty and complex domestic dynamics.
Febrio is confident that despite the VAT adjustment policy, the 2025 economic growth target of 5.2 percent can still be achieved. This confidence could be based on several factors that support the Indonesian economy, such as high domestic demand, pro-entrepreneur stimulus policies, and positive prospects for the export sector. In addition, the global economy, which is expected to improve post-pandemic, could also provide a boost to Indonesian exports.
The government also continues to communicate with various related parties, including financial institutions and business associations, to ensure that the stimulus measures taken can run effectively. This collaboration is expected to accelerate economic recovery and provide peace of mind to people who are worried about the impact of the policy.
With the various stimuli prepared, it is hoped that the public can feel helped in facing this transition. Meanwhile, the government will continue to monitor economic developments and adjust fiscal policies so that the impact can be managed properly. Overall, although this VAT adjustment is a challenge in itself, the efforts made by the government are expected to reduce the negative impact and facilitate the public to continue to be able to adapt to the new economic conditions.
- )* Astara Indocity economic analyst