1% VAT Increase Has No Negative Impact: Government Ensures Community’s Basic Needs Are Protected
Jakarta – Several parties have welcomed the plan to increase the Value Added Tax (VAT) rate by 1% to 12% in 2025, which will strengthen state revenues and support the economic equality program. Despite the increase, a number of goods and services that are basic needs of the community will not be affected by this policy.
Coordinating Minister for the Economy Airlangga Hartarto emphasized that the increase in VAT rates to 12% will not apply to goods and services that are basic necessities such as rice, meat, fish, eggs, vegetables, milk, sugar, education services, health services, public transportation services, labor, financial services, insurance services, polio vaccines, simple houses, and drinking water. Thus, this policy is expected to maintain people’s purchasing power, especially the lower middle class, while continuing to strengthen the state’s revenue base.
“The decision to increase VAT was taken with careful consideration. We want to ensure that goods that are important to the community, such as basic necessities and basic services, will not be affected. This is done to maintain the welfare of the community and support their purchasing power, while other sectors that are not directly related to basic needs will contribute more to state revenues,” said Airlangga Hartarto.
On the other hand, Deputy Minister of Industry Faisol Riza assessed that the increase in VAT rates would not have a major impact on the food and beverage (Mamin) industry. This is because this policy only targets goods and services that are included in the luxury goods category.
According to him, the food and beverage industry that is directly related to the community will not change much because the VAT rate remains focused on more consumptive goods and not basic necessities.
“For sectors that are directly related to the community, especially food and beverage production, we estimate that there will not be many changes. The 12% VAT is more targeted at luxury goods. We will continue to assess the impact and give the industry time to adjust so that it can continue to grow in accordance with the direction set by the government,” said Faisol Riza.
Meanwhile, Deputy Chairman of the Indonesian House of Representatives for Economic and Financial Coordination, Dr. Ir. H. Adies Kadir, stated that the increase in VAT is in accordance with the mandate of the law and is a strategic step to increase state revenue and support economic equality.
Adies Kadir said that this policy is very good for strengthening the Indonesian economy, especially in supporting equitable development throughout the region.
“The increase in VAT is not only to increase state revenue, but also to support a fairer economic distribution throughout Indonesia. The luxury consumer group, which is mostly from the upper class, has high purchasing power, so they are the most able to contribute more to the country,” explained Adies Kadir.
With support from various parties, the increase in VAT rates is expected to be a pillar for Indonesia’s more inclusive, sustainable, and equitable economic development. This policy not only focuses on state revenues, but also on improving the quality of life of the community and equitable development across regions.
