The 12 Percent VAT Impact Price Increase Potentially Disrupts Household Harmony

There is a relationship between the family economy and household harmony. (Unsplash)

JAKARTA The increase in the First Value Tax (VAT) to 12 percent is still a concern for the public. The soaring price of goods and services due to changes in VAT rates is believed to have an impact on the psychological development of children.

Minister of Finance (Menkeu) Sri Mulyani officially raised the VAT rate from 11 percent to 12 percent as of January 1, 2025. This policy does not apply to all goods and services, but focuses on products categorized as luxury goods.

However, this decision sparked a negative reaction from the community. The mass of action from several elements of society protested against the increase in VAT. Starting from students, K-Popers and a number of other elements gathered at the courtyard of the Northwest Plaza National Monument (Monas), Gambir, Central Jakarta and continued their actions at the State Secretariat Office.

Director of Public Policy Center of Economic and Law Studies (Celios) Media Wahyudi Askar said the increase in VAT has the potential to trigger high inflation next year.

The government said that only luxury goods and services were affected by the VAT rate of 12 percent. However, this narrative confuses the public, because those included in the category include premium meat, premium rice, premium fruit, to international private schools.

However, economists say that the 12 percent increase in VAT will almost certainly have an impact on the surge in all goods and services, not only luxury goods as explained by the government.

Therefore, Director of the Right Institute Muhammad Andri Perdana said that the nuances of luxury goods and Java called the government are public acts, because in fact all goods and services will be also affected.

Senior economist from the Bright Institute, Awal Rizky, said that the 12 percent VAT rate will further hit the purchasing power of the lower and lower middle class, even though the government promises incentives for low-income households.

One of the incentives provided is a 50 percent discount in January and February for electricity rates for 900 VA household customers, 1,200 VA, 2,200 VA.

In addition, there are three commodities that should be included in the 12 percent VAT tax object, but the one percent increase in tariffs is borne by the government because it is considered very necessary by the general public. The three commodities are wheat flour, sugar for industry, and people's cooking oil or Minya Kita.

These various incentives are carried out to encourage purchasing power, especially the middle class.

In terms of psychology, the increase in various prices and services due to VAT to 12 percent will have an impact on children's development, as said by clinical psychologist Disya Arinda.

This price increase has the potential to be the beginning of family disharmony. First of all, because middle class parents will be forced to earn additional income to meet their daily needs because prices continue to soar. This risks increasing stress so that emotions become unstable and quality time with children decreases.

"Children will be neglected, then this will make bad emotional regulations and have an impact on declining achievements," said Disya on his social media account.

"When achievements decline, eating will be difficult to compete in the future. In the long term, this has the potential to make them have low income and become a sandwich generation," he added.

Islamic Economic Lecturer from the Faculty of Islamic Sciences Dr. Rahmani Timorita Yulianti M. Ag said there is a relationship between the family economy and household harmony. To be able to realize a harmonious household, parents must be able to make efforts to fulfill the needs that are appropriate for all families.

"Wife's husband as much as possible has the ability, both physically, mentally, and economically or materially. There is a relationship between economic income and family harmony," said Rahmani, quoted by the Indonesian Islamic University website.

"This shows that the more husband and wife have sufficient economic income, the more harmonious the household they build," he added.

Meanwhile, Disya Arinda reminded that poverty is close to violence. Children who are at home often hear the commotion of parents in family economic cases or due to stress due to work, can experience violence in homes or domestic violence.

"Remember that poverty is close to violence. And that can be a factor of psychological trauma," he concluded.