Economists Regret That The Government Chooses To Increase VAT Instead Of Increase Community Income

According to Huda, the consequences are very clear, namely the reduction in people's disposable income when tax rates increase.

Even though there is an increase in the minimum wage, this is not proportional to the impact felt by the community due to the increase in VAT rates to 12 percent.

"Yes, of course, it is sad that the state chooses to collect taxes higher than how to increase people's income first. Even though the consequences are very clear where people's incomes are disposable will decrease when tax rates increase," he explained to VOI, Monday, December 22.

Huda said this would result in people's purchasing power being eroded, thus potentially slowing the growth of household consumption.

"The impact is that people's purchasing power is getting eroded due to declining income with disabilities. This is hard for most or even all groups because it will slow down household consumption growth," he said.

In addition, Huda conveyed that the most serious impact was the potential increase in the number of layoffs due to the decline in demand.

The decline in production will have an impact on reducing the use of labor in each production supply chain.

"The worst impact is being able to add workers who are laid off due to decreased demand. Production will decrease, the use of labor in each supply chain will also decrease," he explained.

To note, the list of VAT rates in ASEAN countries, namely the Philippines, 12 percent, Indonesia 11 percent, will increase to 12 percent in 2025, Vietnam 10 percent, Cambodia 10 percent, Malaysia 10 percent, and Laos 10 percent.

Meanwhile, based on data from Numbeo's report, the UMR list in ASEAN countries is Singapore USD 5,170, Malaysia USD 817, Thailand USD 560, Vietnam USD 461, Philippines USD 348, and Indonesia USD 325.