Minister of Finance Purbaya Considers Lowering VAT Rate

JAKARTA. Minister of Finance Purbaya Yudhi Sadewa stated that the government is assessing whether a reduction in the VAT rate could help stimulate consumer spending. However, he emphasized that the review must be conducted cautiously, as it also depends on the government’s fiscal position and revenue outlook until late 2025.

“We’ll see whether it’s feasible to lower the VAT rate to strengthen people’s purchasing power,” Purbaya said on Tuesday (14/10) in Jakarta during the presentation of the 2025 State Budget (APBN) performance and realization report.

READ: Effective Now: 12% VAT for Luxury Goods, 11% for Non-Luxury Goods

Current VAT Rate

Under the Law on the Harmonization of Tax Regulations (HPP Law), the VAT rate has been set at 12%, effective January 1, 2025.

However, according to Minister of Finance Regulation (PMK) No. 131/2024, certain goods and services are subject to a deemed value (Nilai Lain) and a specific calculation formula, making the effective rate 12% × 11/12 of the tax base (DPP).

VAT and Luxury Tax Revenue Performance

As of the end of October 2025, the Ministry of Finance reported total revenue from VAT and Sales Tax on Luxury Goods (STLG) of IDR 474.44 trillion, a 13.2% decrease compared to the same period in 2024.

The decline was mainly attributed to an increase in tax refund (restitution) claims. (ASP/KEN)