Banggar Chairman Asks Government To Review VAT Increase

Illustration. (Photo: Doc. Antara)

Chairman of the DPR RI Budget Agency (Banggar) Said Abdullah asked the government to review the policy of increasing Value Added Tax (VAT) comprehensively.

"In principle, I ask the government to make a study on the planned increase in VAT more comprehensive, consider all aspects," Said said in his statement in Jakarta, quoted from Antara, Thursday, March 14.

Based on Law Number 7 of 2021 concerning Harmonization of Tax Regulations (HPP), the government has determined to increase VAT to 12 percent by 2025, after increasing to 11 percent in April 2022.

However, considering the current economic condition, Said considered the need for a more mature study of the policy.

The reason is, the level of people's purchasing power that has not fully recovered when compared to the period before 2019 or before the COVID-19 pandemic, which was reflected in household consumption growth of 4.83 percent in 2023, is still lower than the average growth in the 2011-2019 period which was at the level of 5.1 percent.

In addition, the Real Sales Index (IPR) figure has not returned to pre-pandemic conditions, where the IPR 2023 averaged below 210, while the lowest level in 2019 was 220.

He agreed that state revenue could increase by IDR 350 trillion to IDR 375 trillion from this policy. However, he is of the opinion that it is necessary to find other alternatives to boost tax revenue without providing new burdens to the people.

"So, it is not merely the desire to increase state revenue, but considering how our economic condition will be in 2025, especially people's purchasing power, inflation rates in consumer good, housing, transportation, and health," he also said.

Previously, Coordinating Minister for Economic Affairs Airlangga Hartarto said the increase in VAT rates of 12 percent in 2024 would be discussed further and implemented by the next government.

He also explained that Article 7 Paragraph 3, the VAT rate can be changed to a minimum of 5 percent and a maximum of 15 percent. However, said Airlangga, the adjustment of the regulation depends on the next government policy.

Airlangga said the increase in VAT would be discussed further in the preparation of the 2025 State Budget next month.