Kadin: The Increase In VAT To 12 Percent Must Be Followed By Incentives For Affected Sectors

Chairman of the Surabaya City Chamber of Commerce and Industry HM Ali Affandi LNM. (Photo: Doc. Antara)

JAKARTA - Chairman of the Surabaya City Chamber of Commerce and Industry HM Ali Affandi LNM stated that the increase in Value Added Tax (VAT) rates from 11 percent to 12 percent in early 2025 must be followed by the provision of incentives or subsidies for the sector most affected.

"The government needs to provide support in the form of incentives or subsidies to the most affected sectors, such as MSMEs and labor-intensive sectors," said Ali Affandi in Surabaya, East Java, quoted from Antara, Tuesday, November 26.

Andi said that the provision of incentives or subsidies would ease the potential impact experienced by sectors such as MSMEs and labor-intensive due to the increase in VAT rates.

Kadin Surabaya itself views the increase in VAT rates as a strategic step but requires caution and an inclusive approach to bring optimal benefits without sacrificing economic stability and community welfare.

According to him, the increase in VAT rates has two sides that must be considered thoroughly, namely in terms of potential increase in state revenues and in terms of this policy, which will have the potential to erode people's purchasing power.

"It is necessary to consider the government, including a thorough evaluation of the impact of this policy, both in terms of household consumption and the competitiveness of the business world," he said.

Andi also believes that the implementation of the VAT rate increase should be carried out in stages, for example through an increase to 11.5 percent in 2025 before reaching 12 percent in the following year.

"It will give enough time for the community and business actors to adapt," he said.