JAKARTA - APINDO Economic Policy Analyst Ajib Hamdani conveyed that the option of increasing the Value Added Tax (VAT) rate is a dilemma in the national economy. Even though from the regulatory side, the government does have room to make a policy to increase VAT rates.
This is in accordance with Law number 7 of 2021 concerning Harmonization of Tax Regulations (HPP) article 7 paragraph (1): VAT rate of 12 percent which is valid no later than January 1, 2025.
According to Ajib, this article can be a consideration for the government in increasing tariffs. However, on the other hand, the government can also adjust the time or delay, as can be done regarding the carbon tax policy which has been made with many adjustments, even though it has been regulated in Article 13 of the HPP Law.
"This means that the reality of the field and economic conditions can be taken into consideration in making and implementing policies," he said in his statement Tuesday, May 14.
Second, in terms of state finances. Ajib conveyed that according to the main function of taxation for the budgetery aspect, the government designed state finances to rely significantly on tax revenues, including revenue from the VAT sector.
Ajib said that in the 2023 State Budget, the revenue from the VAT and PPNBM sectors reached around Rp764 trillion.
"If the government increases the VAT rate to 12 percent, in 2025 the VAT revenue can be escalated by around 80 trillion additional. The calculation assumption is that the economic growth rates in 2024 and 2025 are in the range of 5 percent and the inflation rate is 2 percent," he said.
Third, from the point of view of the national economy. Ajib conveyed that the increase in VAT rates will have an impact on the national economy on the 2 (two) side, namely business actors and people's purchasing power.
"In principle, VAT is a tax imposed on final consumers, or borne by the wider community," he explained.
According to Ajib in general, it will put pressure on people's purchasing power. And on the other hand, when business actors cancel the increase in VAT rates into the Cost of Sales (HPP), this can reduce the company's profits and become a negative sentiment in business development.
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"The government should focus on state revenues with a wider priority scale, namely on 4 (four) main things: taxes, excise, Non-Tax State Revenue (PNBP), and optimizing BUMN dividends," he said.
Ajib said that in the context of BUMN, the Ministry of Finance as an extension of the government's hand as a shareholder should make benchmarking with a private sector, how many ideal dividends are SOEs, including quantitative measures for the calculation of return on assets (ROA).
"If the government focuses on optimizing this, then the tax aspect can be more as a regular, or an economic regulator, not only as a money collector for the country," he said.
Ajib conveyed that the policy of increasing VAT rates needs to be reviewed, because this policy will be a fiscal disincentive that puts pressure on the economy which is in a positive trend.
"The government has this space. It depends on the willingness and orientation of the government in playing fiscal policies," he concluded.
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