While this increase is part of a broader strategy to enhance government revenue, the current economic and social realities in Indonesia call for a careful reconsideration of this policy. At this critical juncture, it is essential to weigh the potential impact of the VAT hike against the economic pressures faced by the populace.

The purchasing power of the people is the heartbeat of the economy. When this heartbeat weakens, the entire economic body feels the strain.

Data reveals that the proportion of household spending on basic necessities steadily increased from 13.9 percent in January 2023 to 27.4 percent in July 2024. This trend is more than just numbers, it reflects the harsh reality where people are forced to sacrifice other needs just to ensure they can meet their basic living expenses.

Such a condition embodies an injustice that should be remedied, not exacerbated by policies that could further worsen the situation.

Adding to this concern, the manufacturing sector, the backbone of Indonesia's economy, is showing clear signs of weakness. The Purchasing Managers' Index (PMI) for Indonesia's manufacturing sector dropped to 49.3 in July 2024, indicating a contraction.

When the manufacturing sector contracts, jobs are lost, incomes shrink and the vicious cycle of economic slowdown ensues. Increasing the VAT in this context would likely add significant pressure to an already fragile sector, raising production costs and potentially leading to further job cuts.