Toyota Motor: 12 Percent VAT Will Have A Significant Impact On Domestic Component Industry

Illustration. (Photo: Doc. Antara)

JAKARTA - Toyota Motor Manufacturing Indonesia (TMMIN) Vice President Director Bob Azam said the government must prepare a mitigation of the impact of the increase in Value Added Tax (VAT) to 12 percent in order to continue to protect the domestic industry.

According to him, the 12 percent increase in VAT will have a significant impact on the component industry because it will affect the supply chain.

"VAT 12 percent has an impact on the industrial supply chain," he said in Jakarta, quoted from Antara, Thursday, March 21.

Bob said that in order for this policy to continue to have a positive impact on the sustainability of the industry, his party wanted the government to determine whether the policy for imposing VAT would be final or at the end.

"It's the government's mitigation that tried, which was tiered up, it's just the final. Because now it's multiplied," he said.

Coordinating Minister for Economic Affairs Airlangga Hartarto previously confirmed that VAT would increase to 12 percent by 2025.

He said the rules for increasing VAT would be discussed further and implemented by the next government.

The 12 percent increase in VAT is one of the government's tax adjustments plans regulated in Law Number 7 of 2021 concerning Harmonization of Tax Regulations (UU HPP).

In the HPP Law, it is stated that based on Article 7 paragraph 1 of the HPP Law, the previous VAT rate of 10 percent was changed to 11 percent which was in effect on April 1, 2022, and again increased by 12 percent no later than January 1, 2025.

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.