Purbaya: Lowering VAT 1 Percent, State Losing IDR 70 Trillion

Minister of Finance Purbaya Yudhi Sadive (Photo: Doc. VOI)

Minister of Finance Purbaya Yudhi Sadive said that his party was still carrying out calculations regarding the plan to reduce the Value Added Tax (VAT) rate.

According to Purbaya, before serving as Minister of Finance, he felt confident that the reduction in VAT rates could be done easily. However, after occupying the position, it is only realized that every 1 percent reduction in VAT rates has the potential to reduce state revenues to Rp70 trillion.

"I also like to say that when I'm outside, I just drop it to 8 percent, once I become finance minister, every 1 percent goes down I lose IDR 70 trillion in revenue, I'll lose too. So we're thinking about it," he said at the Sarasehan 100 Economist Indonesia event, Tuesday, October 28.

Therefore, he emphasized that before making a decision regarding the reduction in VAT rates, it is necessary to first ensure the ability of the tax system to optimize state revenues.

"I calculate first, actually, the condition of our ability to collect tax and excise is like what if the system is repaired, I will fix it now until the next 2 quarters, maybe the end of next year's first quarter, I have seen it," he said.

Purbaya added, after the ability to receive taxes is measurable through a more efficient administrative system, then you can make big decisions regarding the tax rate reduction policy.

"From there I can actually measure my potential, how much will it be real if I reduce the lack of how much impact it will have on economic growth," he explained.

However, he acknowledged that the plan to reduce VAT rates had become one of the targets he had set since the beginning of his term of office.

"But it was already on paper, it was planned but I have to be careful because I don't know yet, I haven't even (as Minister of Finance) for 2 months, until the end of the year, how much capacity of our tax collection is correct with the improvement of the system, I will calculate everything," he said.

"So even though I am careless like a cowboy, I am stingy and careful if I fall, later it will be above 3 percent of my deficit," he said.