The 2025 Revised State Budget Is A Solution For Postponement Or A Decrease In The 12 Percent VAT Increase

Photo: Special

JAKARTA economic observer Surya Vandiantara assesses that President Prabowo Subianto must intervene to postpone or reduce the increase in Value Added Tax (VAT) by 12 percent which will take effect on January 1, 2025.

According to him, the increase in VAT rates has indeed been regulated in Law Number 7 of 2021 concerning Harmonization of Tax Regulations (HPP).

However, this provision can be easily changed if there is political will from President Prabowo through the 2025 Revenue and Expenditure Budget (APBN-P).

"It takes the political will of President Prabowo to cancel or reduce the increase in VAT. This is because there is room for the government to propose an Adjustment RAPBN if there is a change in fiscal policies," he said, Sunday, December 29, 2024.

Surya explained that the HPP Law which was passed during the era of President Joko Widodo (Jokowi) had also provided space for changes to VAT rates. In Article 7 paragraph (3) of the HPP Law, it is regulated that VAT rates can be changed to a minimum of 5 percent and a maximum of 15 percent.

Furthermore, Article 7 paragraph (4) of the HPP Law explains that changes in VAT rates are regulated by government regulations, after being submitted by the government to the DPR for discussion and agreement in the preparation of the RAPBN.

"President Prabowo's administration can adjust the VAT rate of 12 percent through the Revised State Budget mechanism," he added.

He added that in the 2025 State Budget Law there is also room for the government to propose a revised RAPBN, if there are fiscal policy changes, as stated in Article 42 of the 2025 State Budget Law.

Surya believes that President Prabowo will receive full support from the DPR if he proposes this change. Because, almost all factions in the DPR are now part of the Prabowo-Gibran government coalition. After the RAPBN is approved to become the APBN Law, the government just has to issue a PP on VAT rates.

"This means that once again, President Prabowo only needs political will to cancel or reduce the increase in VAT, which is now being rejected by the public," he said.