Perppu Becomes A Way To Delay VAT Increase To 12 Percent In 2025

Tax (Photo: dock. Unsplash)

JAKARTA - The Center of Economic and Law Studies (Celios) revealed that the Government can postpone the plan to increase Value Added Tax (VAT) from 11 percent to 12 percent as of January 1, 2025 through a Government Regulation in Lieu of Law (Perppu).

BELIOS Legal Director Mhd Zakiul Fikri said there were at least three reasons why the Perpu cancellation of the 12 percent VAT increase had to be issued, namely first, the increase in VAT norms caused urgent legal problems to be resolved.

"The legal issues start from inflation or rising prices of goods and services, declining the ability to consume lower middle class households, increasing unemployment rates, depressed MSMEs, manufacturing industries and the potential to increase the number of poor people in Indonesia," he said in an official statement, Tuesday, December 24.

Zakiul conveyed the second reason, namely the existence of the provisions of Article 7 paragraph (1) Chapter IV Article 4 Number 2 of the 2021 HPP Law is inadequate because it does not contain legal propriety and justice.

Furthermore, Zakiul conveyed the third reason, the current condition is impossible to overcome by making or revising the law through ordinary procedures, considering that it took a long time while the situation was urgent.

"The situation is urgent because as of January 1, 2025, the problematic norm order from Article 7 paragraph (1) Chapter IV Article 4 Number 2 of the 2021 HPP Law must be implemented," he said.

According to Zakiul, the Government could evaluate the increase in VAT by lowering it to 5 percent or increasing it to a maximum of 15 percent, according to the provisions of Article 7 paragraph (3).

"However, reducing the VAT rate or delaying the implementation of the VAT increase is impossible, because they focus on carrying out orders from Article 7 paragraph (1), the pretext that continues to be published in various media," he added.

Zakiul said that although the option of Article 7 paragraph (3) to be implemented, legal chaos will still occur due to the ambiguous and unclear rules regarding barometers to determine 5 percent to 15 percent.

In addition, Zakiul conveyed that the implementation of the norms of Article 7 paragraph (3) must be carried out together with the House of Representatives of the Republic of Indonesia (DPR RI) in accordance with the provisions of Article 7 paragraph (4). As a result, it takes a long, long, and complicated process.

Meanwhile, Zakiul said that the Indonesian House of Representatives was in recess from December 6, 2024, to January 15, 2025, so it was impossible for the matter to be discussed together in the near future.

Thus, in line with the Constitutional Court's Decision No.138/PUU-VII/2009, there is no reason for the government not to issue a Perppu which cancels the enactment of the VAT increase provisions to 12 percent on January 1, 2025.

"The issuance of the Perppu in question is a manifestation of the commitment of the Indonesian State Government to protect the entire Indonesian nation and all of Indonesia's bloodshed and to advance public welfare, educate the nation's life, and participate in implementing world order based on independence, eternal peace and social justice," he explained.

Zakiul said that previously the Jokowi government had issued Perppu No.1 of 2017 concerning Tax Interests. This Perppu was born regarding tax amnesty which is enjoyed more by rich people and tax evaders.

"If Jokowi issues a Perppu for rich people and tax evaders, it is time for Prabowo to leave Jokowi's shadow, by issuing a Perppu to cancel the 12 percent increase in VAT in the HPP Law and it is time to side with the lower middle class who are being narrowed by various economic difficulties," he concluded.