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VAT hike to go ahead as planned amid surging prices: Sri Mulyani
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Australia's Treasurer Josh Frydenberg (right) chats with Indonesia's Finance Minister Sri Mulyani Indrawati (left) during their bilateral meeting on the sidelines of the G20 finance ministers and central bank governors meeting in Jakarta on Feb. 17, 2022. (AFP/Bay Ismoyo)
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inance Minister Sri Mulyani Indrawati said on Tuesday that the government would carry on with a hike in value added tax (VAT) slated to come in effect on April 1, despite calls to refrain amid surging prices in consumer goods.
The Harmonized Tax Law passed last year stipulates that VAT be raised to 11 percent this year and 12 percent three years later, from 10 percent presently. The law also raises income taxes on the rich, scraps a proposal to cut corporate income taxes and introduces carbon taxes, among other measures.
Sri Mulyani said the government needed to reform its tax policy to achieve fiscal consolidation plans. She gave an assurance that the government would, through social aid programs, shield low-income groups from the effects of the hike.
“Since we will give it back to the people, we still have to prepare the foundation. If not, we will lose this opportunity [to reform tax policy],” Sri Mulyani told audiences during a live broadcast.
Raising VAT is expected to aid the government in reinstating a budget deficit cap of below 3 percent of GDP by 2023. The cap was raised in 2020 to accommodate more than US$1 billion of spending for COVID-19 relief efforts.
Read also: Explainer: Key points from impending new tax law
The Indonesian Indigenous Entrepreneurs Association (HIPPI) and Indonesian Chamber of Commerce and Industry (Kadin) have called on the government to ease the implementation of the tax hike.
