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View all search resultsGovt weighs VAT cut to boost sluggish consumption
Indonesia has long struggled to lift its tax-to-GDP ratio beyond the 10 percent mark, with the figure worsening from 10.3 percent in 2023 to 10.08 percent last year.
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Finance Minister Purbaya Yudhi Sadewa provides information regarding the economic package program after a coordination meeting with President Prabowo Subianto at the Presidential Office in Central Jakarta on Sept. 15. (Antara/Muhammad Adimaja)
T
he Finance Ministry is exploring the possibility of reducing the value-added tax (VAT) rate to boost consumption next year, despite an ongoing decline in tax collection. However, the decision will depend on how revenue collection and the overall economy pan out this year.
At a press conference on Tuesday, Finance Minister Purbaya Yudhi Sadewa said he would “see how it goes by the end of the year” because “it is still rather unclear now.”
“We will see if we can lower the VAT to strengthen people’s purchasing power going forward. But we will study it carefully first,” the minister said, adding that the country’s tax-to-gross domestic product (GDP) ratio would continue to improve and “slowly go up” as the real economy recovers.
Indonesia has long struggled to lift its tax-to-GDP ratio beyond the 10 percent mark. In fact, the figure worsened in 2024, falling to 10.08 percent from 10.3 percent the previous year.
President Prabowo Subianto's administration has set a target of achieving a 23 percent revenue-to-GDP ratio by the end of his term, although the president has not specified a target for the tax-to-GDP ratio.
During the 2023 campaign period, Prabowo’s team stated that it aimed to increase the ratio to 13-14 percent by 2029.
Read also: Presidential candidates eye more tax on the rich, digital firms to raise revenue
