Core Economist: Government Gives Inclusive Stimulus Initiating The Impact Of VAT Increase

Researcher from the Center of Reform on Economics (Core) Indonesia Yusuf Rendy Manilet. (Photo: ANTARA)

JAKARTA - Researcher from the Center of Reform on Economics (Core) Indonesia Yusuf Rendy Manilet assessed that the government is trying to provide inclusive stimulus to mitigate the impact of the increase in value added tax (VAT) to 12 percent starting next year.

"In general, if we pay attention, the government is indeed trying to make the stimulus provided inclusive and target all groups of income groups. Starting from lower, middle income, to upper income," he said as quoted by ANTARA, Wednesday, December 18.

For example, 50 percent of subsidy assistance or electricity discount for customers with an installed power of up to 2,200 watts given for two months from January-February 2025 is considered to be one of the relatively large functions of policy.

This is considering that the average expenditure of the community, especially middle to lower opinion groups, to pay for electricity is relatively large.

In percentage terms, electricity payment fees are also said to be the second largest contributor to the second largest allocation in the average group of expenditures for housing needs and household facilities.

"However, the issue is indeed the relatively limited duration given by the government for this discount," he said.

When compared with the incentives provided by the government during the COVID-19 pandemic, the duration of the electricity discount is even valid for up to nine months.

Several groups of electricity discounts were also given up to 100 percent, but the government was still able to maintain economic growth since 2021.

Although some incentives are provided by the government to overcome the impact of VAT 12 percent, he continued, at the same time the stimulus is limited because it can only be implemented with those who work in the formal sector.

In fact, not a few middle class also work in the informal sector, so they cannot get tax incentives from the government.

Yusuf also highlighted the incentives for guaranteeing job loss (JKP) that were deemed unsuitable, especially when it was linked to efforts to maintain purchasing power.

"Because these incentives will only be given when they or the middle class lose their jobs. In fact, it is precisely what the government must do so that they do not lose their jobs, so that they can continue to consume at the same level and still be able to maintain household consumption to pursue an aggregate economic growth target," he said.