VAT 12 Increase For Luxury Goods, Economist Reveals First Time In History

Director of the Center of Economic and Law Studies (Celios), Bhima Yudhistira. (Photo: Theresia Agatha/VOI)

JAKARTA - Director of the Center of Economic and Law Studies (Celios), Bhima Yudhistira said, the increase in Value Added Tax (VAT) to 12 percent in 2025 for luxury goods was the first time in history.

"Indonesia is familiar with VAT one tariff which means that the difference in VAT is 12 percent for luxury goods and VAT 11 percent for other goods is the first time in history," he told VOI, Thursday, November 12.

Bhima explained, of course, this creates confusion for all parties, both for business actors and consumers.

For example, in retail stores that sell goods subject to VAT and PPNBM, such as electronic equipment stores, the tax invoices will become more complex.

"Moreover, one retail store, for example, sells goods subject to ppn and ppnbm. Examples are electronic equipment stores. Tax invoices will also be more complex. Retail business actors can go to consumers with a higher price of goods," he said.

Therefore, Bhima said that with a higher price it could threaten the purchasing power of the middle class, even though 12 percent VAT was only applied to luxury goods.

According to Bhima, it is also necessary to be aware of the potential for inflation that precedes tax or pre-emptive inflation policies, especially during the Christmas and New Year (Nataru) periods where prices for goods and services tend to rise.

Entrepreneurs may compensate for the unclear rules regarding VAT of 12 percent by increasing the price of goods for final consumers.

Bhima conveyed that for goods that fall into the luxury category and are subject to 12 percent VAT, there needs to be further details from the Ministry of Finance as stated in the technical regulations of PMK.

"Goods that are categorized as luxury and subject to 12 percent must be detailed again by the Ministry of Finance and this is stated in the technical regulations of PMK. But it's also strange because the difference in goods tariffs actually still needs to change the HPP Law regarding goods subject to VAT 12 percent and which goods don't get hit," he explained.

Bhima conveyed the consequences, this problem not only lies in Article 7 of the HPP Law, but also requires revisions to other articles, especially Article 4 which regulates excluded goods, due to differences in new rates or changes to multi-tariffs.

According to Bhima, because the time was getting closer to the implementation of VAT 12 percent in January 2025, the existing rules felt floating.

"If you want to pay attention to people's purchasing power, issue a Perpu, delete Article 7 in the HPP Law regarding VAT 12 percent. That's the best solution," he explained.