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Govt proceeds with VAT hike but rolls out incentives to soften blow
The government is proceeding with its plan of hiking value-added tax to 12 percent at the turn of the year but has announced multiple incentives to soften the blow for consumers.
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High-ranking officials brief the press about the new economic stimuli intended to cushion the impact of an impending value-added tax (VAT) hike to 12 percent at the Office of the Coordinating Economic Minister in Jakarta on Dec. 16, 2024. (JP/Deni Ghifari)
T
he government is proceeding with its plan of hiking value-added tax (VAT) to 12 percent at the turn of the year but has announced multiple incentives to soften the blow for consumers.
Coordinating Economic Minister Airlangga Hartarto said in a press conference on Monday that certain key staples, such as rice, beef, fish and vegetables, were exempted from VAT entirely.
“Following the Tax Harmonization Law, in accordance with the deadline that’s been set, the VAT rate next year will increase to 12 percent as of Jan. 1,” said Airlangga.
Three other staples, namely flour, industrial sugar and the state-distributed Minyakita cooking oil were technically subject to the 12 percent VAT rate, but buyers would not feel the effect immediately, as the government itself would initially cover the additional 1 percent, the minister explained, without specifying how long that arrangement would last.
The government also announced its intention to hand out 10 kilograms of rice per month in January and February to 16 million households categorized as poor.
A 50-percent electricity discount is also to be offered in the same two-month period for households connected to power supply of up to 2,200 volt-amperes.
Airlangga also said a partial VAT waiver on certain house purchases put in place in November 2023 would be extended to mid-2025, and then through to the end of the year, but reduced by 50 percent in the second half.
