RI Occupies The Highest VAT Position And The Lowest UMR In ASEAN, The Burden Is Considered Handed Over To The Community

VAT 12 Percent (Photo: Unsplash)

JAKARTA - Director of the Center of Economic and Law Studies (Celios), Bhima Yudhistira also highlighted Indonesia's fifth position with the lowest Regional Minimum Wage (UMR) in Southeast Asia, but inversely proportional to the imposition of a high value added tax (VAT).

Bhima assessed that this policy burdens the community, especially workers, with higher taxes while their income is unable to catch up with the increasing burden of life.

"That means that the government is only burdening higher taxes on the community, especially workers, while income is unable to catch a high living burden, one of which is due to tax collection," he explained to VOI, Monday, December 22.

According to him, increasing tax burdens that are not offset by increasing public income can risk reducing people's purchasing power which is getting sharper and in turn will complicate the achievement of state tax revenue targets.

In addition, Bhima predicts that Indonesia's tax ratio will remain at 10 percent to 10.5 percent until 2029, far from the target tax ratio desired by Prabowo, which is 23 percent.

"The tax ratio is estimated not to move at 10-10.5 percent until 2029. Far from the target of the Prabowo tax ratio of 23 percent," he explained.

Bhima added that this counterproductive policy would actually reduce purchasing power, the low tax ratio and the cost of maintaining purchasing power would be much more expensive than the tax revenues obtained by the state, one of which was the implementation of VAT 12 percent.

"If the method is counterproductive, the purchasing power will decrease, the tax ratio is low. Even the cost of maintaining purchasing power will be much more expensive than the tax revenue obtained by the state, for example, the VAT 12 case," he concluded.

To note, the list of VAT rates in ASEAN countries, namely the Philippines, 12 percent, Indonesia 11 percent, will increase to 12 percent in 2025, Vietnam 10 percent, Cambodia 10 percent, Malaysia 10 percent, and Laos 10 percent.

Meanwhile, based on data from Numbeo's report, the UMR list in ASEAN countries is Singapore USD 5,170, Malaysia USD 817, Thailand USD 560, Vietnam USD 461, Philippines USD 348, and Indonesia USD 325.