Basic Food Tax, Observer: Government Is Reactive, Should Have Known This Is A Sensitive Issue

Illustration. (Photo: Unsplash)

JAKARTA - The government's plan to collect value-added tax or VAT on basic goods or basic necessities has received attention from many parties. CORE Indonesia economist Piter Abdullah said that the imposition of a tax on basic necessities will reduce public consumption. This will have a negative impact on the national economy.

As is known, VAT for basic necessities is contained in the plan to expand the VAT object as regulated in the Revision of Law Number 6 of 1983 concerning General Provisions and Tax Procedures (KUP).

"Just taxing basic necessities will certainly have an impact on the community, this is planned for 1 percent. Even though 1 percent will still have an impact, firstly purchasing power, secondly psychologically. There are a series of things such as rising inflation, decreasing purchasing power, eventually decreasing consumption, having an impact on investment," he said in a virtual discussion, Friday, June 11.

Furthermore, Piter said the government must prepare a mature argument regarding the tax imposition plan for basic necessities. Because this issue is very sensitive for the community in the midst of this COVID-19 pandemic.

"The communication is so bad, the government is reactive, it should have realized from the start that this issue was sensitive, the VAT on basic necessities, education and if it should be done, the arguments should be prepared carefully. Even though there are many types of basic necessities, for example, premium-like wagyu meat," he said.

Not only that said Piter, but traders will also feel the impact of the imposition of taxes on basic necessities. One of the most felt by traders occurred because of sluggish purchasing power.

Sequentially, said Piter, this tax withdrawal will have an impact on increasing food prices, then triggering a weakening of purchasing power, and leading to a decline in consumption.

"When it happened in the middle of a pandemic, the transfer of prices to consumers led to a decrease in purchasing power, a decrease in consumption, which then turned to traders, the impact," he explained

Previously, Finance Minister Sri Mulyani said that from a political ethics perspective, she had not been able to explain in detail to the public regarding VAT for basic necessities. This is because the regulation has not been discussed with the DPR, in this case, Commission XI, which is in charge of taxation.

Furthermore, Sri admitted that she was surprised that this draft law was leaked to the public.

"Because it is a public document that we submitted to the DPR through the Presidential Letter and because of that the situation became a bit awkward because then the document came out because it had already been sent to the DPR as well," he said in a meeting with Commission XI of the DPR, Thursday, June 10.

Sri Mulyani said this situation made the government unable to explain the overall tax architecture that was planned. However, he regretted that due to the leaking of the draft KUP Bill, information on the government's policy plans was only understood in pieces and not comprehensively.

"We're not in a position to be able to explain the whole architecture of our taxation, which came out bit by bit which was then blown up and seems to be something that doesn't even take into account today's situation," he said.

VAT on groceries has not yet applied

Sri Mulyani ensured that at this time the VAT for basic necessities had not been applied. She also apologized to the council members who had been questioned by their constituents due to the unfolding of the plan.

"I'm also sorry that all Commission XI was asked why there was a policy, as if now VAT has gone up, even though there isn't any," she said.

According to Sri, even if the KUP Bill is realized, not everything that is proposed by the government will be approved and implemented in the near future. Later everything will be discussed in advance by the DPR RI.

"We will present all of that in full, by sector, by economic actors, why are we proposing this article, what is the basis and even if it is the right direction, should it be now, should it be 6 months, should it be next year, we will discuss all of that later fully with Commission XI," she said.