By: Dirandra Falguni)*
The Indonesian government has once again demonstrated its strong commitment to protecting the people amidst economic challenges by launching the Economic Policy Package for Welfare. This policy was announced at a press conference in Jakarta, attended by a number of relevant ministers such as Coordinating Minister for the Economy Airlangga Hartarto and Minister of Finance Sri Mulyani Indrawati. The main focus of this policy is to protect people’s purchasing power, maintain economic stability, and support business actors.
As part of the Tax Regulation Harmonization Law (UU HPP) Number 7 of 2021, the increase in the VAT rate from 11% to 12% is a strategic step in national tax reform. However, the government is also aware of the potential impact of this policy on society, especially the lower middle class. Therefore, a number of incentives have been designed to ensure that this policy does not burden the lower class.
For example, the government will provide VAT exemption facilities or 0% tariffs for essential goods and services, such as basic necessities (rice, meat, fish, eggs, milk, sugar consumption), education services, health, transportation, and electricity and drinking water usage. This step provides relief for the wider community, because these goods are part of daily living needs.
For low-income groups, additional incentives in the form of Government-borne VAT (DTP) of 1% are applied to strategic staple goods such as Minyakita cooking oil, wheat flour, and industrial sugar. Thus, the VAT rate for these commodities remains at 11%, although nationally the rate has increased to 12%. This policy is considered crucial to maintain people’s purchasing power, especially in meeting basic needs.
In addition, the government is providing food assistance in the form of 10 kg of rice per month to 16 million beneficiaries from decile groups 1 and 2 for the first two months of 2025. A 50% electricity bill discount for households with power up to 2,200 VA is also provided during the same period, which is projected to help 81.4 million customers or 97% of national electricity users.
For the middle class, the government ensures the continuity of a number of previous incentives, such as VAT DTP for home purchases with prices of up to IDR 5 billion, incentives for battery-based electric motor vehicles (EVs), and exemptions from import duties for certain EV vehicles. In addition, new policies such as PPnBM DTP for hybrid motor vehicles and income tax (PPh) Article 21 DTP incentives for workers in labor-intensive sectors with salaries of up to IDR 10 million per month are also designed to maintain purchasing power stability.
To provide a sense of security for workers affected by layoffs, the government through BPJS Ketenagakerjaan optimizes the benefits of Job Loss Insurance (JKP), including training and access to job information.
MSMEs, as the backbone of the Indonesian economy, also receive special attention in this policy package. The extension of the 0.5% Final Income Tax rate for MSMEs until 2025 is one of the real efforts to encourage the growth of this sector. MSMEs with a turnover of less than IDR 500 million per year even get full tax exemption.
For the labor-intensive industrial sector, the government provides a 5% interest subsidy to support the revitalization of production machines. This policy is expected to increase productivity, create jobs, and strengthen the competitiveness of the national industry in the global market.
In this policy package, the government emphasizes the principles of justice and mutual cooperation. Luxury goods and services, such as premium food, premium health services, and exclusive education services, are now subject to a 12% VAT rate. Minister of Finance Sri Mulyani said that this policy was designed to reflect the principle that those with greater ability should contribute more. On the other hand, low-income people get full protection through various tax-free facilities and subsidies.
Minister of Trade Budi Santoso added that VAT incentives for basic necessities such as Minyakita, wheat flour, and industrial sugar are very important to maintain price stability amidst the increase in VAT rates. He said the prices of these commodities would not change at the consumer level, so that people’s purchasing power would be maintained.
This Economic Policy Package is also expected to accelerate national economic growth. The support given to MSMEs and the industrial sector not only encourages increased production, but also creates new jobs. On the other hand, direct assistance to the lower middle class ensures that purchasing power remains strong, which ultimately increases domestic consumption as one of the main pillars of the economy.
Coordinating Minister for Economic Affairs Airlangga Hartarto is optimistic that this incentive will support people’s consumption power in facing changes in VAT rates. He emphasized that the beneficiaries of the 50% electricity discount reached 81.4 million customers, which means that almost all households in Indonesia feel the benefits of this policy.
The government’s courage in implementing tax reform through increasing VAT rates needs to be appreciated, especially because this policy is accompanied by clear incentives that favor the small and medium communities. The government not only prioritizes social justice, but also provides a strong foundation for inclusive and sustainable economic growth.
With various policies that have been designed, the government has proven that people’s welfare remains a top priority, even amidst global economic challenges. This step is expected to lead Indonesia towards a more solid and equitable economic recovery in the years to come.
)* Contributor to Beritakapuas.com
