Government Considers Delaying 12% VAT Increase While Awaiting Stimulus

The government is considering postponing the increase in the Value-Added Tax (VAT) rate to 12%, originally scheduled for January 2025. The delay will be implemented until the stimulus is ready to be provided as compensation for the affected public.

However, the government has not yet detailed the form of compensation being prepared. This was stated by Luhut Binsar Pandjaitan, Chairman of the National Economic Council, on Tuesday (November 26) in Jakarta.

According to Kontan.co.id, the government is currently conducting a comprehensive review of the potential impact of implementing the 12% VAT increase. Several factors are being considered, including global and domestic challenges.

On the global side, geopolitical developments are a significant focus, including the leadership transition in the United States with the election of Donald Trump and the economic slowdown in China.

Domestically, the government is dealing with the weakening purchasing power of the middle class. Therefore, any policy introduced must promote more inclusive and sustainable growth.

For the information, the policy to increase VAT to 12% is mandated by the Law on the Harmonization of Tax Regulations (HPP).

The regulation outlines a two-phase VAT increase. The first phase was implemented on April 1, 2022, raising the rate from 10% to 11%. The second phase, increasing the rate to 12%, is scheduled to take effect no later than January 1, 2025. (ASP/KEN)