VAT Increases 11 Percent Starting April 1, Sri Mulyani: Building A Strong Tax Foundation

JAKARTA - Minister of Finance, Sri Mulyani, said that the plan to increase the value-added tax (VAT) from 10 percent to 11 percent as of April 1, 2022, is needed to build a strong taxation foundation.

According to her, VAT is one of the two biggest contributors to the government's tax revenues, apart from corporate income tax (PPh).

"Indonesia needs to build a strong taxation foundation", she said in a discussion entitled Spectacular 2022 which was broadcast virtually on Wednesday, March 23.

The Minister of Finance then compared Indonesia's VAT at 11 percent with countries in the G20 and the OECD, which averaged 15 percent.

"This VAT increase was carried out to strengthen the Indonesian economy in the long term and help finance the State Budget, including providing various incentives for MSME actors affected by the pandemic", she said.

Furthermore, the state treasurer explained that the increase in tax rates is fair because on the other hand there is a policy of assistance for groups of people in need.

For information, the current increase in tax levies is part of the Law on the Harmonization of Tax Regulations (UU HPP) to expand the tax base, create justice and equity, strengthen tax administration, and increase tax compliance.

“We know that there are goods and services that are consumed by many people and become necessities. So that they are not exposed to 11 percent, they are given the possibility to get rates that are only 1, 2, and 3 percent. That is also the concept of justice from VAT", she said.

On the other hand, goods and services for public needs, such as education, health, and basic goods such as regular non-premium rice are exempt from VAT.

"So this is what we call setting up our tax foundation. For the basic needs of the community, we give them free or borne by the government or at a much smaller tariff, namely 1, 2, and 3 percent", she said.

The Minister of Finance hopes that all tax policies can be used to achieve justice for all Indonesian people.

"The taxes paid by taxpayers are a form of defending the country and are the main backbone of national development", concluded Minister of Finance, Sri Mulyani.