The Government Is Thinking About Economic Conditions To Increase VAT To 12 Percent

JAKARTA - Secretary of the Coordinating Minister for Economic Affairs Susiwijono Moegiarso said the government had taken into account the increase in Value Added Tax (VAT) to 12 percent in formulating the assumptions of the Macroeconomic Framework and the Principles of Fiscal Policy (KEM-PPKF) 2025.

For information, based on Article 7 of Law No. 7 of 2021 concerning Harmonization of Tax Regulations (HPP), it is stated that the increase in VAT to 12 percent is valid no later than January 1, 2025, after the increase in VAT rates from 10 percent to 11 percent in April 2022.

"All assumptions of any anticipation (increase to VAT 12 percent) have been used as the basis for making a posture (APBN 2025). So actually everything has been calculated," said Susi to the media crew at her office, Thursday, July 25.

However, Susi conveyed that the implementation of the increase in VAT rates from 11 percent to 12 percent in 2025 would continue to adjust the new government's decision so that there is still a possibility that the policy will be postponed.

According to Susi, the government has formulated a state revenue target in the event of an increase in VAT so that if there is an increase in VAT, 12 percent will raise state revenues from taxes.

As for the 2025 RAPBN, the government is targeting revenues in 2025 of 12.3 percent to 12.36 percent of gross domestic product (GDP).

In addition, Susi added that currently his party is also continuing to coordinate with Deputy Minister of Finance II Thomas Djiwandono to smooth out the transition process.

"So far, Mr. Deputy Minister II has had a long discussion, and it is very appropriate so that the transition can go straight away. So that in general it has been involved in the formulation. So I think it will be even better and smoother in everything," he said.

On the same occasion, Coordinating Minister for Economic Affairs Airlangga Hartarto conveyed that the decision to increase VAT of 12 percent will consider economic conditions next year, because the policy is distortional, it will affect purchasing power.

"Well, if it's (VAT 12 percent) we'll see the domestic economic capacity," he said.

Previously, Minister of Finance Sri Mulyani Indrawati opened her voice regarding the implementation of the Value Added Tax (VAT) policy to 12 percent as of January 1, 2025.

"The 12 percent VAT has also been discussed, including the political fatsun of the HPP Law, which we all discussed, have agreed but we respect the new government," he explained during a working meeting with Commission XI at the DPR/MPR Building, Jakarta, Tuesday, March 19, 2024.

According to Sri Mulyani, the new government has the right to change the policy that was previously agreed upon and could be adjusted to the directions and policies promised during the campaign.

"So if the VAT target remains 11 percent, it will be adjusted later," he explained.

In addition, Sri Mulyani said that she would design the 2025 State Budget according to the limits that have been regulated in the State Finance Law. Namely, the State Budget will be designed in the form of a baseline, meaning that it only contains mandatory and routine government spending. So that from this posture, there will be fiscal space that can be utilized by the new government in the first year.

"We will signal how big the fiscal space is," he said.