By: Adnan Ramdani )*
The Value Added Tax (VAT) adjustment policy of 1% is a major step taken by the government to increase state revenue and create a more efficient and equitable taxation system. This policy has been prepared by considering various aspects, including applicable laws and regulations and agreements between various related parties, so that it is not only based on unilateral decisions, but with the active participation of all stakeholders.
The imposition of a 1% VAT adjustment refers to Law Number 7 of 2021 concerning the Harmonization of Tax Regulations which was passed as a step towards tax reform in Indonesia. This law aims to improve the existing tax system to make it more modern, fair, and efficient. In the process of formulating this policy, the government has involved various stakeholders such as entrepreneurs, associations, and the community to obtain diverse views and accommodate the interests of various parties. This shows that the policy is not only a top-down policy, but rather a mutual agreement that is expected to have a positive impact on the Indonesian economy as a whole.
Regarding the VAT which has increased to 12%, the Coordinating Minister for Economic Affairs, Airlangga Hartanto, said that the VAT is a mandate from Law Number 7 in 2021 concerning the Harmonization of Tax Regulations (UU HPP). Article 7 paragraph 1 of the HPP Law states that the VAT rate of 12 percent will apply no later than January 1, 2025. In addition, Airlangga also stated that to anticipate the increase in VAT rates, the government has issued a series of incentive packages for next year. This is intended to maintain people’s purchasing power. The VAT rate is maintained with the DTP VAT incentive policy, where the government bears 1 percent of the VAT rate for the three important basic goods which should increase to 12 percent.
With the adjustment of VAT rates, many parties see it as the right step to strengthen Indonesia’s tax system. Previously, many parties considered that the existing tax structure was not fully able to answer the increasingly complex economic challenges. This new VAT policy, despite the adjustment of rates, still provides incentives for certain sectors that are considered important for economic growth, such as the MSME sector and the export sector.
In addition, this policy also aims to improve transparency and taxpayer compliance. With a simpler and more integrated system, supervision of tax revenues is expected to be more effective. This is also in line with the main objective of the Harmonization of Tax Regulations, namely to create a tax system that is easier for the public and business actors to understand, thereby minimizing tax avoidance practices that have so far been a problem in various sectors. The government has also attempted to provide socialization and training to the public and business actors regarding this change, so that the transition runs smoothly and does not cause misunderstandings.
The 1% VAT adjustment policy has also taken into account the diverse socio-economic conditions of the community. In this case, the government ensures that this policy will not burden the community, especially low-income groups. One real example of this policy is the VAT exemption for basic necessities, such as food and medicine, which still maintains the principle of social justice.
Meanwhile, Minister of Finance, Sri Mulyani Indrawati, said that the Government will bear the increase in value added tax (VAT) of 1 percent for three commodities when the 12 percent VAT is implemented on January 1, 2025. The three commodities are wheat flour, sugar for industry, and people’s cooking oil or MinyaKita. The three commodities are considered very necessary for the general public, so the Government has decided to implement VAT borne by the government (DTP) on the increase in VAT rates that will apply. Sri Mulyani stated that the decision is the Government’s commitment to preparing fiscal instruments that are in favor of the people.
It is important to note that this policy is also designed to improve Indonesia’s competitiveness in the global arena. One of the main objectives of the harmonization of tax regulations is to create a better business climate in Indonesia, thereby attracting more foreign investment. A transparent and easy-to-understand tax system is one of the important factors considered by investors in choosing a location to invest. With more stable VAT rates and agreements between the government and business actors, Indonesia is expected to become a more attractive investment destination in the future.
The 1% VAT adjustment policy based on the law and the results of stakeholder agreements is a very positive step for the Indonesian economy. In addition to increasing state revenue, this policy also prioritizes the principles of justice, transparency, and sustainability. With cooperation between the government, business actors, and the community, this policy is believed to have a positive impact on Indonesia’s economic growth in the future. In the future, it is hoped that the taxation systemThis better n can support the achievement of more equitable and sustainable development for all Indonesian people.
)* The author is a domestic economic observer
