Celios Observer Says Planned 12 Percent VAT Tariff Increase Needs To Be Postponed, Here's The Reason

Executive Director of the Center of Economic and Law Studies (Celios) Bhima Yudhistira. (Photo: Theresia Agatha/VOI)

JAKARTA - Executive Director of the Center of Economic and Law Studies (Celios) Bhima Yudhistira assessed that the plan to increase the value added tax rate (VAT) to 12 percent next year needs to be postponed.

This is because the plan to increase the VAT rate is considered quite high if it is accumulated in the last 4 years.

"The 12 percent increase in VAT rates when accumulated in the last 4 years actually increased by 20 percent, not 2 percent. From 10 percent to 11 percent, then to 12 percent. In total, yes, 20 percent increased," said Bhima when contacted by VOI, Wednesday, March 27.

He considered that the plan to increase the VAT rate was also quite burdensome for the community, in addition to the current high price of food commodities.

"Middle class has been hit by an increase in food prices, especially rice, high interest rates, difficult to find work. In the future, 12 percent of VAT tariff adjustments will still be added. We are worried that people's spending can go down," said Bhima.

According to him, the plan to increase the VAT rate will also have an impact on business actors themselves, in which in the end there will be an adjustment in production capacity to reduce the number of workers needed. "Worry, the VAT rate will increase, it could become layoffs in various sectors," he said.

In addition, he continued, the plan to increase VAT rates is not a solution to increase state revenue. The reason is, if consumption slows down, state revenues from various taxes, including VAT, are actually affected.

"(The plan to increase the VAT rate) needs to be postponed because the moment is not right," he added.

For your information, the government plans to increase the value added tax rate (VAT) to 12 percent by 2025. The tariff adjustment has been stated in Law Number 7 of 2021 concerning Harmonization of Tax Regulations (UU HPP).

Coordinating Minister for Economic Affairs Airlangga Hartarto said the decision to increase VAT to 12 percent by 2025 would wait for the next government's decision, namely the elected presidential and vice presidential candidate Prabowo Subianto-Gibran Rakabuming Raka.

"Regarding VAT, the HPP Law. So, so far the HPP Law has sounded this way, but what is decided depends on what the government's program will be," said Airlangga after the Inclusive Financial National Council Coordination Meeting (DNKI) on Friday, March 22.

According to Airlangga, if the new government approves to implement a 12 percent VAT tariff policy at the beginning of next year, the policy will later be included in the 2025 State Budget Law.