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VAT hike faces backlash all around
Business associations and netizens have expressed disapproval of the planned value-added tax (VAT) hike set to go into effect at the turn of the year, arguing that the timing is not right as spending power has been losing vigor.
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Rising costs: A customer picks a bottled beverage from a refrigerated display at a supermarket in South Tangerang, Banten, on July 5. (Antara/Sulthony Hasanuddin)
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usiness associations and netizens have expressed disapproval of an impending value-added tax (VAT) hike, arguing that the timing is not right as spending power has been losing vigor in recent months.
After an increase from 10 percent to 11 percent on April 1, 2022, the VAT rate is to be raised to 12 percent on Jan. 1, 2025, in accordance with Law No. 7/2021 on taxation.
Indonesian Employers Association (Apindo) chairwoman Shinta Kamdani told The Jakarta Post on Wednesday that the plan “must be re-reviewed” as its implementation “could put serious pressure on people’s spending power”, which in turn could slow down economic growth.
With much the same reasoning, many parties, including members of the House of Representatives, have advised against proceeding with the plan.
In a press statement released on Tuesday, Lawmaker Cucun Ahmad Syamsurijal from the National Awakening Party (PKB) argued that prices would go up and harm “particularly the poor and vulnerable”.
However, during a meeting on Nov. 13 between the Finance Ministry and House of Representatives Commission XI, which oversees financial affairs, the government reaffirmed the plan.
Finance Minister Sri Mulyani Indrawati argued in the meeting that the hike was necessary to “maintain the health of the state budget”, according to Kompas daily.
