Legislators Criticize 12 Percent VAT Increase: Think About The Fate Of Affected MSMEs!

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JAKARTA - Deputy Chairman of Commission VII DPR RI Evita Nursanty criticized the Government's policy of implementing 12 percent VAT in January 2025. He is worried about the sustainability of MSME players in the midst of the economy who are still recovering.

"The government needs to consider alternatives that are more inclusive and oriented towards the sustainability of the MSME sector. Instead of increasing VAT, the Government can optimize other sources of income through improvements to a more effective tax system," said Evita, Wednesday, November 20.

Although the increase in VAT is a mandate from Law Number 7 of 2021 concerning Harmonization of Tax Regulations (HPP), according to Evita, the Government needs to consider the current economic conditions.

"We understand the Government's intention to increase revenue, but now the economic turmoil has had a lot of significant impacts on the people. Also think about the fate of millions of MSMEs who will be affected, including workers who live from there," he said.

Evita reminded that when VAT increases, the price of goods and services will also increase so that people's purchasing power will be affected. Especially for lower middle class groups of people. Meanwhile, the MSME sector will depend heavily on the stability of people's purchasing power. If purchasing power decreases, it is certain that MSME products tend to fall along with the increase in selling prices.

"MSMEs are at risk of experiencing a significant decline in sales, resulting in the inability to maintain cash flow and balance of their business finances. If this is forced at the wrong time, the community will find it increasingly difficult to affect the impact of its participation, and next year's economic growth will be lower than the original target," explained Evita.

In fact, according to Evita, policies that focus on improving the tax administration system and efficiency of state spending will be more beneficial to the economy than burdening MSMEs with tax increases.

"The increase in VAT to 12 percent has the potential to increase the burden on MSME actors, which is the backbone of the Indonesian economy," said the legislator from the Central Java III electoral district.

Evita understands that there are a number of items that are excluded from the increase in VAT of 12 percent, such as basic necessities, educational services, Health services, transportation, and others, but there are many goods affected by the impact, including local products that will become more expensive than before.

"Of course this reduces the competitiveness of MSME products in the market. This situation will make consumers choose lower imported products and cause market inequality and make it difficult for MSMEs to maintain their market share," he asked the government to inform details regarding which items were affected and not subject to VAT.

The presence of the state

Evita assessed that actually MSMEs only need the presence of the state in opening the market so that their production results are absorbed properly. Not only domestic market access, but also to the global market so that Indonesian MSME products can compete in the international arena.

"Including access to networking as well. The government can help MSMEs cooperate with SOEs or local governments to support marketing their products," said Evita.

The leadership of the Commission in the DPR in charge of industrial affairs and MSMEs also encourages the Government to improve training and technical guidance for MSME players, especially in terms of digitalization. In the globalization era as it is today, Evita said that MSMEs really need to market their products in the digital market so that training is needed.

"These MSMEs must be digitally literate because if they do not penetrate the digital market such as through e-commerce or others, we will be left behind," he explained.