Revealed, Vat Rate Increase Plan Is Still Discussed In The Internal Ministry Of Finance

Ministry of Finance Building. (Photo: Doc. Between)

JAKARTA - The government's plan to raise the Value Added Tax (VAT) rate in recent days has come to the public's attention. Secretary of the Coordinating Ministry for Economic Affairs, Susiwijono Moegiarso said the plan is still under discussion in the Ministry of Finance.

"The point is we respect the discussion of internal discourse in the Ministry of Finance, but there has been no meeting between ministries to discuss this," he said in a virtual press conference, Monday, May 17.

Susiwijono said that his party will immediately ask for an explanation about the plan to increase the VAT rate to the Ministry of Finance if there is a definite plan. Because, this policy will affect all sectors.

"Surely later we will ask to be scheduled immediately if there is a definite plan and there is a clear conception of when it will be delivered. Because this influence to all sectors is not only the real sector, the manufacturing industry sector will all be hit, therefore we have reported," he explained.

According to Susi, the Ministry of Economy promised to provide a more detailed explanation of the plan to increase the VAT rate in the next two days or Wednesday 19 May.

"In 1-2 days, I will discuss with friends in the Ministry of Finance and later Wednesday we will explain the full," he said.

Earlier, the Institute for Development of Economics and Finance (Indef) asked the government in this case Finance Minister Sri Mulyani to review plans to raise the value added tax or VAT rate from 10 percent to 15 percent next year.

Executive Director Indef Tauhid Ahmad considers the government's plan to raise VAT rates in the midst of an unstable economic situation is an inappropriate step.

"The 15 percent rate increase must be reviewed if it needs to be scrapped because until 2022 even 2023 we are still in a period of economic recovery," he said in a virtual discussion on Tuesday, May 11.

Tauhid reasoned that the plan is not appropriate because no party can be sure when the pandemic will end. So it is estimated that the state of society is still unstable.

"There's still a huge burden on the economy so if it's burdened with plans to increase VAT I think that would be a pretty serious issue," he said.

Furthermore, Tauhid said the level of community welfare in the next year is expected to remain relatively stagnant. In fact, it's in decline. So it shows there has not been a significant increase in economic activity.

Meanwhile, said Tauhid, in terms of people's purchasing power, inflation, consumer confidence index for next year is also predicted to have not recovered so it still needs help from the government and not burdened with the increase in VAT rates.

Actually, Tauhid said, when viewed in terms of competitiveness, indonesia's VAT rate compared to other countries is relatively the same which is about 10 percent.

On the other hand, Tauhid assesses the increase in VAT will make investors who plan to invest in the country will rethink. This is because, investors need to calculate production costs up to their profits.

Reduce state revenue

Not only that, Tauhid also reminded that the government's plan to raise vat rates will actually reduce state revenues. Because, this will have an impact on the price of commodities that are increasingly expensive.

The increase in commodity prices, said Tauhid, will cause people to reduce their consumption levels in line with the end of the pandemic crisis, thus further suppressing state revenues.

"Not necessarily the state revenue is getting higher even more or less. This is what I think should be careful when the government tries to raise these rates," he said.

Previously, the government through the Minister of Finance (Minister of Finance) Sri Mulyani Indrawati planned to raise the value added tax (VAT) rate. The goal is to optimize tax receipts. The planned increase in the value added tax (VAT) rate is expected to be realized soon.

Coordinating Minister for Economic Affairs Airlangga Hartarto said that the government's efforts in raising VAT are currently under discussion. Even so, he acknowledged that this plan will be included in the draft law (Bill) on General Provisions and Procedures for Taxation (KUP).

"The issue of VAT rates is still under discussion, and this is also associated with the discussion of the Law (Uu) that will be conducted to the House of Representatives, namely the Bill of General Provisions and Taxation Procedures (KUP), and this will be discussed entirely by the government later in time will be delivered," he said in a virtual press conference, Wednesday, May 5.

Referring to Law No. 42/2009 on the Third Amendment to Law No. 8.1983 on VAT on Goods and Services and Sales Tax on Luxury Goods, the government can change the amount of levies.

The law regulates the change of the lowest tariff is at the figure of 5 percent and the highest 15 percent. While currently the VAT rate is 10 percent. This increase in VAT rates will have an impact on the increase in the price of goods and services.