Chairman Of Banggar DPR Opens Voice About Supporting VAT Increase To 12 Percent In 2025

Chairman of the DPR Budget Agency (Banggar) and Chairman of the PDI-P DPP Said Abdullah. (Photo: ANTARA)

JAKARTA - Chairman of the DPR's Budget Agency (Banggar) as well as Chairman of the PDI-P DPP Said Abdullah opened his voice regarding the latest political dynamics, with the existence of attacking each other between political groups related to the plan to increase Value Added Tax (VAT) from 11 percent to 12 percent in 2025.

Said sees that this leads to a situation that is counterproductive to the current economic situation even though the nation's energy is needed to unite, facing the difficult 2025 economic challenges.

"Moreover, at this time we are facing negative sentiment from the top market to strengthen the United States dollar against the rupiah, because the expectations of investors for strengthening the United States economy under President Donald Trump," he explained in his statement, Tuesday, December 24.

Said said that Bank Indonesia together with the government had conveyed to the DPR that they had tried to stabilize the rupiah with maximum effort and it was hoped that it could produce stable rupiah movement.

Said said that the increase in VAT from 11 percent to 12 percent was a mandate from Law No. 7 of 2021 concerning Harmonization of Tax Regulations (HPP) which has been in effect since 2021 and the increase in VAT is actually not an instantaneous event.

"Before April 1, 2022, the VAT rate is valid at 10 percent. After Law No. 7 of 2021 applies, it is regulated that the VAT rate increase will be 11 percent as of April 1, 2022, and then January 1, 2025, the VAT rate will be 12 percent, so there will be a gradual increase," he explained.

Said explained that the government was given discretionary space to reduce VAT at a lower limit at the level of 5 percent and an upper limit of 15 percent when deemed necessary, considering the condition of the national economy.

Said conveyed that the government and the DPR agreed to include additional tax revenue assumptions from the implementation of VAT 12 into the state revenue target in the 2025 State Budget.

In addition, Said said that in Law No. 7 of 2021 concerning HPP, it mandates a number of goods and services that cannot be subject to VAT or 0 percent VAT.

As for a number of goods and services that cannot be subject to VAT or 0 percent VAT, namely exports of goods and services, procurement of vaccines, general textbooks, religious textbooks, holy books, construction of places of worship, government projects funded from grants or foreign loans.

Furthermore, goods and services for disaster management, basic needs consumed by many people, as well as the procurement of goods and services for strategic national development.

Furthermore, Said said, the government and the DPR have agreed on a state revenue target through the implementation of VAT 12 percent to support President Prabowo Subianto's strategic program.

"In the discussion of the 2025 State Budget, the government and the House of Representatives also agreed on a state revenue target with the assumption that the implementation of VAT is 12 percent to support various strategic programs of the President, Mr. General Purn Prabowo Subianto to realize his strategic programs such as the quick win program which will be funded by the 2025 State Budget," he explained.

Said said that his strategic programs, such as the quick win program which will be funded by the 2025 State Budget, namely Free Nutrition Food which requires around Rp71 trillion in funds, Free Health Checks Rp3.2 trillion, Complete Hospital Development in Regions Rp1.8 trillion.

Then, examination of infectious diseases (TBC) Rp. 8 trillion, Renovation of Schools Rp. 20 trillion, Integrated Superior Schools Rp. 2 trillion, and National, Regional and Village Food Barns Rp. 15 trillion.

In addition, Said explained in a working meeting between the Coordinating Minister (Menko) and the DPR Banggar on December 2, 2024, it was also stated that in 2027 the government is targeting rice self-sufficiency.

Thus, Said explained, these programs are in line with the PDI-P's agenda to improve the quality of Human Resources (HR), as well as encourage inclusive health programs.

"On that basis, the PDI-P is committed to overseeing and securing the success of the Quick Win Program above through support for the 2025 State Budget," he explained.