VAT Up 12 Percent Only Targets Luxury Goods, Observers Call Small Country Revenue Potential

JAKARTA - Tax observer from the Center for Indonesia Taxation Analysis (CITA) Fajry Akbar assesses that if the 12 percent increase in Value Added Tax (VAT) is only for luxury goods, the potential for government tax revenue will not be significant.

Fajry said that if it is only imposed on objects that have been subject to Sales Tax on Luxury Goods (PPnBM), the increase will be carried out narrowly. One of the consequences is the potential for smaller acceptance.

"It is certain that the narrow increase in VAT rates will not increase significant tax revenues, only small," he said in his statement, quoted on Sunday, December 8.

For information, last year's PPnBM revenue was around Rp. 24.9 trillion and the largest revenue was contributed by motorized vehicles with a maximum tariff of 15 percent.

Fajry said that based on the rough calculation, if the 12 percent VAT rate is only imposed on the PPnBM object, then the potential for acceptance is only IDR 1.7 trillion.

According to him, instead of applying the 12 percent VAT rate only for luxury goods, it is better for the government to increase the PPnBM rate.

"If the increase in VAT rates only applies to PPnBM objects, wouldn't it be better if the Government only raises the PPnBM rate? This is a big question, especially the increase in PPnBM rates can be increased by more than 1 percent. It makes more sense to fund government programs," he explained.