Government Must Change HPP Law Before Implementing VAT 12 Percent

Illustration (Photo: Doc Antara)

JAKARTA - Tax observer from the Center for Indonesia Taxation Analysis (CITA) Fajry Akbar hopes that the government will have to change Law Number 7 of 2021 concerning Harmonization of Tax Regulations (UU HPP) before raising Value Added Tax (VAT) to 12 percent by 2025.

"Even if the government wants to increase it to certain objects, such as those subject to the Sales Tax on Luxury Goods (PPnBM) alone, it is necessary to change the Law and it will take time (to change it to multi tariffs). In fact, the increase in VAT rates is less than a month away," he explained in his statement, Friday, December 6.

To note, the increase policy is contained in Law Number 7 of 2021 concerning Harmonization of Tax Regulations (UU HPP) in Article 7 paragraph (1), the 12 percent VAT rate is valid no later than January 1, 2025, after the increase in VAT rates from 10 percent to 11 percent in April 2022.

Fajry said that legally the HPP Law only recognizes the single tariff scheme so that the increase in VAT rates will be imposed thoroughly on VAT objects except for those provided with facilities.

Previously, the Chairman of Commission XI of the DPR RI, Mukhamad Misbakhun, revealed that the plan to increase the Value Added Tax (VAT) rate by 12 percent on January 1, 2025, will continue to be carried out based on the results of discussions with President Prabowo Subianto.

"As a result of our discussion with the President, we will continue to follow the law that VAT will continue to run according to the schedule of the mandate in the law, namely January 1, 2025," he explained after discussing with Prabowo at the State Palace, Tuesday, December 5.

Misbakhun said that the implementation of the VAT tariff of 12 in 2025 would be carried out selectively, namely targeting luxury goods.

"Selective to several communities, both domestic and imported goods related to luxury goods. So that the government only provides that burden to consumers who buy luxury goods," he said.

According to Misbakhun, small communities do not need to worry about the increase in VAT by 12 percent in 2025 because for small communities it remains at the current VAT rate.

Misbakhun said that the government will also review the non-single VAT tariff policy so that VAT will not be in one tariff and will be adjusted to the class of each commodity.

"So that it will no longer apply, the government plans are still being studied, carried out in a more in-depth study, that VAT will not be in one tariff, not in one tariff and this will still be studied later," he said.

Misbakhun also asked the public not to worry because the scope of basic goods needs, then education services, health services, then banking services related to matters of general service, government services, is still not used by VAT.

"Mr. President is also trying to bring order to many matters related to illegal matters, so that it will increase state revenues that have not been detected so far," he added.