Stimulus Through VAT Encourages People’s Economic Growth with the Principles of Justice and Mutual Cooperation
JAKARTA — The Indonesian government is strengthening economic stimulus by adjusting the Value Added Tax (VAT) rate from 11% to 12%, effective January 1, 2025. This policy aims to expand financing for subsidies and social assistance, encourage people’s economic growth with the principle of justice and the spirit of mutual cooperation.
Finance Minister Sri Mulyani Indrawati stated that the government continues to strive to maintain purchasing power and stimulate the economy through various policies, including taxation.
According to him, tax is an important instrument of development based on the principles of justice and mutual cooperation. This principle underlies the selective implementation of 12% VAT.
“Justice is where groups of people who are able will pay their taxes according to their obligations under the law, while groups of people who are unable will be protected and even given assistance,” said Sri Mulyani.
“This is where the principle of the state comes in,” he added.
This stimulus favors the people by exempting VAT (0% VAT) for basic necessities, education services, health, and public transportation. The government bears the 1% VAT increase for goods such as wheat flour, industrial sugar, and Our Oil.
The government also allocated stimulus in the form of social protection assistance and tax incentives worth IDR 265.6 trillion for 2025.
“The 2025 tax incentives will be mostly enjoyed by households, and will encourage the business world and MSMEs in the form of tax incentives,” said Sri Mulyani.
According to the Coordinating Minister for Economic Affairs, Airlangga Hartarto, he explained that the 1% VAT adjustment policy is a mandate of Law Number 7 of 2021 concerning the Harmonization of Tax Regulations (HPP Law).
“Article 7 paragraph 1 of the HPP Law states that the VAT rate of 12 percent will apply no later than January 1, 2025. This is a mandate from the law, not the government’s wish,” said Airlangga in his statement.
Furthermore, Airlangga ensured that the government continues to consider the needs of the community, especially those with low incomes. “The government will bear 1 percent VAT for certain food items for low-income people,” he added.
In line with Airlangga, the Head of the Ministry of Finance’s Communication and Information Services Bureau, Deni Surjantoro, stated that this policy has gone through an in-depth discussion process with the DPR. “The adjustment of the VAT rate takes into account various aspects, such as economic, social, and fiscal, so that this policy is truly comprehensive,” said Deni.
The increase in VAT is expected to increase state revenue without neglecting protection for vulnerable groups. The government also continues to prioritize the principle of justice in implementing fiscal policy.
