Economist Calls Plans For Purbaya To Lower VAT Can Dongkrak Purchasing Power And Real Sector

JAKARTA - Head of the Trimegah Sekuritas Indonesia Economist Fakhrul Fulvian views that the plan of the Minister of Finance of the Republic of Indonesia, Purbaya Yudhi Sadive, to review the Value Added Tax (VAT) rates, could be an important catalyst for the recovery of purchasing power and the revival of the real sector in the Prabowo era.

"Since the adjustment of VAT was made some time ago, there has been a shift in the pattern of household consumption. The portion of savings and third party funds owned by the household sector continues to decline, indicating pressure on people's consumption capabilities," said Fakhrul in Jakarta, Wednesday.

The reduction in VAT rates will be a bold step to break the purchasing power deadlock which is the main obstacle to economic growth in the last two years.

In addition to encouraging consumption, this policy is also considered to strengthen a healthier and more inclusive national economic structure.

Fakhrul explained, the impact of the decline in VAT will move in two large directions.

First, exciting the real sector and household consumption. The reduction in tariffs will reduce the price of goods and services, increase people's purchasing power, and revive domestic demand.

This effect will feel broad, especially in labor-intensive sectors such as food-drinking, retail, tourism, and logistics.

Second, providing incentives for business actors to transform into the formal sector. With a lighter consumption tax burden, the transition from informal to formal economic activity becomes more attractive.

"This is not only a matter of lower tariffs, but also a matter of incentives for small business actors to enter a formal ecosystem and get greater access to financing," said Fakhrul.

He emphasized that the reduction in VAT rates did not immediately reduce state revenues. On the other hand, in the medium term, this step will actually expand the tax base and increase fiscal compliance because the public sees the direction of pro-people and real pro-sector fiscal policies.

However, Fakhrul reminded the importance of maintaining fiscal sustainability by strengthening non-VAT revenues.

He highlighted two crucial things that need to be implemented in parallel to the tariff reduction policy.

First, reforming rising sectors of illegality, such as cigarettes without excise stamps and cross-border trade that are still experiencing the practice of miss-invoiting.

Second, building a fair and transparent tax and customs system, with a compliance by design approach. Not only law enforcement, but also public ease and trust in the fiscal system.

"Efforts to increase state revenues do not have to go through high tariffs, but through a system that is fair and trusted. If the formal economy grows, tax revenues will increase by themselves," said Fakhrul.

Dengan kombinasi penurunan PPN, pemulihan daya beli, dan formalisasi sektor informal, Fakhrul memperkirakan ekonomi Indonesia berpotensi tumbuh di atas 5,3 persen pada 2026.

“Ini momentum bagi pemerintah untuk mengembalikan optimisme ekonomi domestik. Kita tidak bisa menunggu kredit atau investasi tumbuh dengan sendirinya. Kita perlu menghidupkan kembali konsumsi sebagai fondasi utama. Penurunan PPN adalah langkah berani untuk itu,” tutup Fakhrul.

With the combination of decreasing VAT, restoring purchasing power, and formalizing the informal sector, Fakhrul estimates that Indonesia's economy has the potential to grow above 5.3 percent in 2026.

This is momentum for the government to restore domestic economic optimism. We can't wait for credit or investment to grow by itself. We need to revive consumption as the main foundation. The decline in VAT is a bold step for that," concluded Fakhrul.