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Tax office defends proposed VAT on education, staple foods
The Taxation Directorate General has defended a draft to amend VAT rules that will levy taxes on staple foods and education services, arguing that the proposed changes will not place a burden on low-income households but make taxation more just for everyone.
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Helping hand: A registration officer at the Menteng Dua tax office in Jakarta helps a taxpayer on March 3. (JP/Yulianto Catur Nugroho)
T
he Taxation Directorate General has defended a draft to amend value added tax (VAT) rules that will levy taxes on staple foods and education services, arguing that the proposed changes will not place a burden on low-income households but make taxation more just for everyone.
Tax office spokesman Neilmaldrin Noor said the prevailing VAT scheme prevented the government from taxing consumption by upper-income households, as they were treated the same as lower-income households. He said this policy meant the amount of tax collected was lower than it should be.
Noor cited as an example Wagyu, a premium type of beef imported from Japan and consumed primarily by upper-income households. Like regular beef sold at traditional markets, it is not subject to VAT under the existing law. A different treatment should apply for such beef, Noor argued. He also said making school tuition subject to VAT would not affect lower-income families much, because they could choose schools that were cheaper or free.
“Those who can afford [expensive goods and services] do not pay VAT […]. The [rules] currently in place are not well targeted. Therefore, we are fixing this,” Noor told reporters during an online press conference on Monday.
Read also: Govt, House move closer to talks on new tax law
The new VAT scheme is included in a proposed amendment of Law No. 6 of 1983 on general tax provisions and procedures. The proposal also includes a new carbon tax, a higher tax rate for high-net-worth individuals (HNWI) and a plan resembling the 2016 tax amnesty.
The government has presented the amendment as an effort to increase state revenue in a bid to push the state budget deficit back below the threshold of 3 percent of the gross domestic product (GDP) by 2023, as required by Law No. 2 of 2020 on the pandemic response.
