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By : Dhita Karuniawati ) *
The government has set a policy of increasing Value Added Tax (VAT) by 1% to strengthen the national economy in the long term. The plan to increase the VAT rate is a follow-up to the ratification of Law Number 7 of 2021 concerning the Harmonization of Tax Regulations (UU HPP) by the House of Representatives of the Republic of Indonesia (DPR RI) on October 7, 2021. The policy has received support from various elements of society. They believe that the 1% VAT increase has been carefully considered for the benefit of the nation and will not harm society, especially the lower middle class.
The HPP Law stipulates a gradual increase in VAT rates, from 10% to 11% which will come into effect on April 1, 2022, and then to 12% no later than January 1, 2025. The main objective of this policy is to increase state revenues to support development programs and community welfare.
In addition, the government also provides stimulus in the form of various social protection assistance for lower-middle class communities (food assistance, 50% electricity discount, etc.), as well as tax incentives such as, extension of the validity period of 0.5% Final Income Tax for MSMEs; PPh 21 DTP incentives for industry on works; and various VAT incentives with a total allocation reaching IDR265.6 T for 2025.
Tax is an important instrument for development. In its collection, it always prioritizes the principles of justice and mutual cooperation. This principle also underlies the implementation of the policy of increasing VAT from 1% to 12% which is selective for the people and the economy. In addition to being fair, this stimulus also prioritizes siding with the community. This siding can be seen from the determination of goods and services needed by the community at large such as basic necessities, education services, health services, public transportation services remain exempt from VAT (0% VAT). However, goods that should pay 12% VAT include wheat flour, sugar for industry, and Minyak Kita (formerly bulk oil) the burden of the 1% VAT increase will be paid by the Government (DTP).
Finance Minister Sri Mulyani Indrawati said that the value-added tax (VAT) policy increased by 1% to 12% applies to luxury goods that were previously VAT-free.
The VAT rate adjustment is imposed on goods and services that are categorized as luxury and consumed by the wealthy, including health services or facilities (faskes) and international schools that are commonly used by the upper class. Meanwhile, the government does not provide VAT for hospitals or private schools that are widely accessed by the lower middle class.
Likewise, Member of Commission VI of the Indonesian House of Representatives Herman Khaeron said that the 1% VAT increase policy was focused on luxury goods and accompanied by affirmative programs that support low-income communities.
Herman claims that the increase in VAT on luxury goods is aimed at increasing state revenue, which will then be allocated for pro-people programs.
The government has prepared affirmative steps to ensure that the impact of this policy does not spread to the general public. When implementing a 1% VAT increase for luxury goods or imposed on the wealthy, at the same time there are also pro-people programs to improve economic capacity in the community. Therefore, for sectors that are basic needs of the community such as basic necessities, the tax is at 0 percent. Then there are also incentives that will be given to people who are indeed low-income.
The Young Nurani Rakyat Movement (Gemura) also emphasized its support for the 1% VAT increase policy. Gemura views the policy as part of a crucial effort to strengthen the Indonesian economy.
Deputy General Chairperson of DPP Gemura, M. Ria Satria said that Gemura fully supports the Gerindra Party’s statement which emphasizes that the 1% VAT increase will only be applied to luxury goods, with the aim of not burdening the lower classes.
Gemura believes that the 1% VAT increase policy has a long-term goal to strengthen Indonesia’s tax system and increase state revenue. The additional revenue is greatly needed to fund development projects that can improve the quality of life of the Indonesian people. This policy is a strategic step that needs to be taken to ensure sustainable development.
Gemura emphasized that although criticism of this policy is still growing, they believe this policy will provide long-term benefits for the country’s economy and the welfare of the Indonesian people.
Meanwhile, Deputy Chairman of the DPR Budget Agency from the Gerindra Faction, Wihadi Wiyanto, also clarified that the 1% VAT increase policy was not a policy of the Prabowo Subianto government. But rather the result of a legislative decision made by the DPR in the 2019-2024 period led by the PDI Perjuangan. The 1% VAT increase is a legislative decision taken within the framework of the Tax Regulation Harmonization Act. The Gerindra Party only provides support.
The government will continue to listen to various inputs in improving the fair taxation system and policies. With these efforts, the momentum of economic growth is expected to continue to be maintained, while protecting the community, and maintaining the health and sustainability of the APBN.
Let’s end the debate that tends to find fault with the party that initiated the increase in VAT rates. Because, this actually exacerbates and muddies public opinion. With the right policies and collaboration between the government, the DPR, and stakeholders, a 1% VAT increase can support economic growth while improving public welfare sustainably.
*) The author is a contributor to the Indonesian Strategic Information Study Institute
