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Tax amnesty hailed as alternative to VAT hike
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Seeking state revenue: People pass by a banner promoting the government's tax amnesty at the Tanah Abang textile market in Jakarta in 2016. (Antara Photo/Wahyu Putro A)
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lawmaker has defended a new tax amnesty as a way to make up for lower-than-planned state revenue from value added tax (VAT), given that a VAT hike initially meant to take effect on Jan. 1 will probably be pushed back.
House of Representatives Legislation Body (Baleg) chairman Bob Hasan told The Jakarta Post on Tuesday that the VAT increase to 12 percent from 11 percent at present “may be postponed” and that the planned tax amnesty was the solution to cover for the forgone increase in revenue.
“The tax amnesty can hopefully help balance [the cost of the government’s] short- and medium-term programs,” said Bob, before mentioning President Prabowo Subianto’s plans to provide free meals for millions of school children and achieve food and energy self-sufficiency as examples of the administration’s policy priorities.
Given the programs’ high costs, the government has to ramp up revenue to maintain a healthy state budget, such as by increasing tax collection.
The VAT hike was supposed to kick in at the turn of the year and bring in an extra Rp 70 trillion (US$4.4 billion) to Rp 80 billion for the state coffers, but the plan has been met with broad rejection.
Read also: VAT hike faces backlash all around
A delay of the VAT increase is now deemed likely, with National Economic Council head Luhut Pandjaitan saying on Wednesday that it might be pushed back by two or three months, as the government sought to roll out social aid first.
