By : Alexander Joshua Galen )*
The government has shown its seriousness in maintaining people’s purchasing power through a strategic decision to hold back the increase in Value Added Tax (VAT). Minister of Finance, Sri Mulyani Indrawati, emphasized that the VAT rate will not change for goods and services currently taxed at 11 percent. This step shows the government’s real efforts in protecting the interests of the people, especially amidst the challenges of the global economy which are still full of uncertainty.
Sri Mulyani explained that goods and services that were previously exempt from VAT, such as staple foods, public transportation, and health services, will still not be subject to tax. This decision is regulated in Government Regulation Number 49 of 2022 which provides exceptions for strategic sectors. This reflects the government’s commitment to ensuring that people’s basic needs remain affordable and are not affected by the tax burden.
In contrast, the 12 percent VAT rate will only apply to luxury goods that were previously subject to Luxury Goods Sales Tax (PPnBM). These goods include private planes, yachts, and residences priced above IDR 30 billion.
According to Sri Mulyani, the policy is in line with the principle of fairness in taxation, where higher taxes are imposed on the consumption of goods that do not have a direct impact on the needs of the wider community.
President Prabowo Subianto, in a meeting at the Ministry of Finance, emphasized that the decision was a form of government commitment to maintaining economic stability and improving public welfare.
The Head of State considered the decision as real evidence of the government’s commitment to the people. This is in line with his vision to create sustainable and inclusive economic equality.
Bhima Yudhistira, an economic observer from the Center of Economic and Law Studies (CELIOS), views the policy of holding back the increase in VAT as the right step to maintain people’s purchasing power.
According to Bhima, the decision shows that President Prabowo understands the importance of fiscal policies that support the pro-people mandate. In addition, this step can also increase public trust in the new government, while providing space for the community to continue to meet daily needs without being burdened by tax increases.
The decision also signals that the government is prioritizing the basic needs of the community amid inflationary pressures and fluctuations in global commodity prices. Bhima assessed that by maintaining the 11 percent VAT rate for general goods and services, the government is helping to maintain stable purchasing power.
The move is also expected to be able to control the rate of inflation so that it has a positive impact on the national economy as a whole. Thus, the community still has access to basic goods and services without being disturbed by price increases.
High appreciation should be given to how the government’s courage in making decisions that side with the wider community without sacrificing state revenue significantly. Good supervision is believed to be able to ensure that this policy runs according to its objectives.
Sri Mulyani also added that the management of the State Budget (APBN) is still carried out with the principle of prudence. Based on the 2024 APBN implementation report, the government has succeeded in controlling the budget deficit within safe limits.
This provides confidence that the decision not to raise VAT will not disrupt the country’s fiscal stability. In fact, the government is still launching a stimulus package worth IDR 38.6 trillion in the form of rice assistance, electricity discounts, and other incentives to support the community during early 2025. With this step, the government ensures a balance between fiscal sustainability and direct support to the community.
The policy of holding back the increase in VAT is also seen as a strategic step that sends a positive signal to investors. By ensuring tax stability, the government creates a more conducive investment climate.
This is expected to encourage inclusive and sustainable economic growth. Investors are expected to increasingly trust the government’s commitment to maintaining economic stability, which in turn can increase investment flows into the country.
President Prabowo emphasized that fiscal policy must reflect social justice and support the long-term goals of national development. He emphasized that this decision was taken after considering various aspects, including input from the public and economic experts.
The President also reminded that fiscal policy is not merely about collecting state revenues, but also a tool to achieve the welfare of the people as a whole. This approach is expected to create a solid foundation for the Indonesian economy in the future.
The government’s move to hold back the increase in VAT is a clear demonstration of its commitment to the people. By keeping the VAT rate at a reasonable level and only increasing taxes on luxury goods, the government is sending a clear message that the welfare of the people is its top priority.
The decision is expected to maintain economic stability, strengthen people’s purchasing power, and support the vision of a just, prosperous, and globally competitive Indonesia. (*)
)* The author is a contributor to Suara Khatulistiwa