Hippindo: Government Needs To Give Incentives If VAT Tariffs Increase To 12 Percent

Chairman of the Indonesian Shopping Center Association and Tenants (Hippindo) Budihardjo Iduansjah. (Photo: Doc. Antara)

JAKARTA - Chairman of the Indonesian Shopping Center Association and Tenants (Hippindo) Budihardjo Iduansjah asked the government to provide incentives to the public if the Value Added Tax (VAT) rate of 12 percent is enforced in 2025.

Budihardjo said that the policy needed to be carried out to maintain people's purchasing power. According to him, the increase in tariffs must be returned to the community through social programs.

"If it can't be postponed, it's an additional 12 percent, it can be returned by increasing purchasing power, it could be in the form of a program, for example a health program, to the people under the economic stimulus of the additional money," said Budihardjo in Jakarta, quoted from Antara, Wednesday, August 28.

The increase in VAT to 12 percent, said Budihardjo, will not be felt directly by the retail sector in the short term.

However, this will affect people's purchasing power, especially the middle class.

"I don't mean it right away, but if there is no stimulus returned, in the medium term, our competitiveness will decrease. If it increases by 1 percent, my answer doesn't immediately make it quiet, there is only a long and medium term that must be considered," he said.

It is known, Minister of Finance Sri Mulyani Indrawati said that she was still coordinating with the President-elect Prabowo Subianto regarding the policy of increasing the Value Added Tax (VAT) rate to 12 percent.

"We continue to communicate and consult with the elected president," said Sri Mulyani when met at the Senayan Parliament Complex, Jakarta, Tuesday (27/8).

During a press conference for the 2025 RAPBN in Jakarta some time ago, Sri Mulyani explained that President-elect Prabowo Subianto was aware of the policies contained 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 already in effect on April 1, 2022, and again increased by 12 percent no later than January 1, 2025.

Nevertheless, the HPP Law also provides space to convert VAT to a minimum of 5 percent and a maximum of 15 percent.

The Minister of Finance also highlighted that the Government has provided VAT exemption policies for a number of groups, such as basic needs, education, health and transportation. The State Treasurer said this incentive was enjoyed in the middle to upper class groups.