After Being Branded " Handwashing", PDIP Now Supports 12 Percent VAT Increase

Chairman of the PDI-P DPP, Said Abdullah (ANTARA)

JAKARTA - The chairman of the PDI-P DPP, Said Abdullah, said his party supports an increase in value added tax (VAT) to 12 percent. This attitude was conveyed by Said after previously the PDIP was labeled washing hands by other political parties because the bull party was considered the initiator of the draft Law on Harmonization of Tax Regulations (HPP).

"Observing the latest political dynamics, the existence of attacks between political groups related to the planned increase in Value Added Tax (VAT) from 11 percent to 12 percent, we see that it leads to a counterproductive situation," Said said in his statement, Tuesday, December 24.

"Even though the energy of this nation we need to unite, facing the economic challenges of 2025 which is not easy. Especially now that we are facing negative sentiment from the market above the strengthening of the United States Dollar against the Rupiah, because the expectations of investors for strengthening the United States economy are under President Donald Trump. Bank Indonesia and the government convey to us that we have tried to stabilize the rupiah with a maximum effort. We hope that the rupiah yield will return to stability," he continued.

To clear up various perceptions in the public sphere and provide legal certainty, Said stated, the increase in VAT from 11 percent to 12 percent is a mandate from Law Number 7 of 2021 concerning Harmonization of Tax Regulations (HPP) which is valid since 2021.

"The increase in VAT is actually not an incident that comes instantly. Before April 1, 2022, the VAT rate is valid at 10 percent. After Law No. 7 of 2021 applies, it is regulated that the increase in VAT rates will be 11 percent as of April 1, 2022, and then January 1, 2025, the VAT rate will be 12 percent, so there will be a gradual increase," said Said.

"However, the government is given discretionary space to reduce VAT at a lower limit at the level of 5 percent and an upper limit of 15 percent if deemed necessary, considering the condition of the national economy," he continued.

The chairman of the DPR RI Budget Agency explained that Law Number 7 of 2021 Chapter IV article 7 paragraph 1 letter b has been regulated that the imposition of Value Added Tax (VAT) of 12 percent is valid no later than January 1, 2025. On the basis of this provision, Said said, the government and the DPR agreed to include additional tax revenue assumptions from the implementation of VAT 12 into the state revenue target in the 2025 State Budget.

"Furthermore, the 2025 State Budget has been promulgated through Law Number 62 of 2024. This law is agreed upon by all factions in the DPR, and only the PKS faction of the DPR RI has given approval with a note. Thus the implementation of VAT 12 percent has legal force," said Said.

The East Java electoral district legislator said that Law Number 7 of 2021 concerning HPP mandates a number of goods and services that cannot be subject to VAT or 0 percent VAT.

Among other things are exports of goods and services, procurement of vaccines, general textbooks, religious textbooks, holy books, construction of places of worship, government projects funded by grants or foreign loans, goods and services for disaster management, basic needs consumed by many people, as well as procurement of goods and services for strategic national development. In the discussion of the 2025 State Budget, Said said, the government and the DPR also agreed on the target of state revenue assuming the implementation of VAT 12 percent to support President Prabowo Subianto's strategic programs to realize his strategic program.

Such as the quick win program which will be funded by the 2025 State Budget. Among other things, free nutritious meals that require around Rp71 T, free health checks of Rp3.2 T, construction of Complete Hospitals in Regions of Rp1.8 trillion, examination of infectious diseases (TBC) of Rp8 trillion, renovation of schools of Rp20 T, Integrated Superior Schools of Rp2 T, and National Food Barns, Regions and Villages of Rp15 T.

In addition, he added, in a working meeting between the Coordinating Minister (Menko) and the DPR Banggar on December 2, 2024, it was also stated that by 2027 the government is targeting rice self-sufficiency.

"Thus, the program above is actually in line with the PDI-P's agenda to improve the quality of Human Resources (HR), as well as encourage inclusive health programs," said Said.

"On that basis, the PDI-P is committed to guarding and securing the success of the Quick Win Program above through support for the 2025 State Budget," he concluded.