VAT Tariffs Increase To 12 Percent In 2025, Airlangga Reveals In Accordance With Law

Coordinating Minister for Economic Affairs (Menko) Airlangga Hartarto. (Photo: Doc. ANTARA)

Coordinating Minister for Economic Affairs Airlangga Hartarto said that the government will continue to adjust the value added tax rate (VAT) to 12 percent next year because it has been mandated in the Law on Harmonization of Tax Regulations (UU HPP).

"The law is clear (the VAT rate will increase by 12 percent in 2025)," he told the media crew in Jakarta, Thursday, August 8.

However, Airlangga explained that the delay in VAT rates to 12 percent could be done if there were other regulations.

"Unless there are things related to the law (which delays the policy). There is (currently) nothing," he explained.

Airlangga conveyed that the Draft State Revenue and Expenditure Budget (RAPBN) next year will be submitted by President Joko Widodo during the 2025 RAPBN Financial Note speech.

"So, we just monitor the records of the Financial Note," he said.

For information, based on Article 7 of Law No. 7 of 2021 concerning Harmonization of Tax Regulations (HPP), it is stated that the increase in VAT to 12 percent is valid no later than January 1, 2025, after the increase in VAT rates from 10 percent to 11 percent in April 2022.

Previously, Minister of Finance Sri Mulyani Indrawati opened her voice regarding the implementation of the Value Added Tax (VAT) policy to 12 percent as of January 1, 2025.

"The 12 percent VAT has also been discussed, including the political fatsun of the HPP Law, which we all discussed, have agreed but we respect the new government," he explained during a working meeting with Commission XI at the DPR/MPR Building, Jakarta, Tuesday, March 19, 2024.

According to Sri Mulyani, the new government has the right to change the policy that was previously agreed upon and could be adjusted to the directions and policies promised during the campaign.

"So if the VAT target remains 11 percent, it will be adjusted later," he explained.

In addition, Sri Mulyani said that she would design the 2025 State Budget according to the limits that have been regulated in the State Finance Law, namely that the State Budget will be designed in the form of a baseline, meaning that it only contains mandatory and routine government spending.

So that from this posture, there will be fiscal space that can be utilized by the new government in the first year.

"We will signal how big the fiscal space is," he said.