Indonesia's VAT rise to 121 TP3T not set for next year for now

The government will discuss the policy plan to increase the value-added tax (VAT) by 121 TP3T, and it has not yet been decided whether the policy will be implemented in 2025. On Wednesday (April 23, 2024), the Coordinating Minister for the Economy said the issue would only be discussed in the framework of the national budget APBN.Now that President Joko's government is discussing the Government Work Program (RKP) for 2025, the document will serve as a reference for the government's discussions with Parliament on the Draft National Revenue and Expenditure Budget (RAPBN) for 2025. Raising VAT to 12% is a mandatory provision of the HPP Law passed by President Joko in October 2021, which requires VAT to be raised to 11% in April 2022 and continue to be raised to 12% by January 1, 2025 at the latest.

The plan to increase the value-added tax (VAT), which has been resisted by economists and entrepreneurs, will make Indonesia one of the few ASEAN countries with the highest VAT rate with this increase. Economists fear that the increase will further curb the purchasing power of people who have yet to recover from the pandemic. The Finance Minister has also previously stated that the VAT increase to 12% is not a fixed plan and that these provisions may change even if the government and parliament agree to it.The 12% VAT has been discussed and this also includes the politics of the HPP law, which they have all discussed and agreed to, but will also respect the new government. The new government has the right to change previously agreed policies and of course it will adjust to the direction and policies promised during the election campaign. So if the VAT target stays at 11%, adjustments will be made later.