Indonesia: VAT hike to go ahead as planned amid surging prices: Sri Mulyani

  • Finance Minister Sri Mulyani Indrawati said on Tuesday that the government would carry on with a hike in value added tax (VAT) slated to come in effect on 1 Apr 22, despite calls to refrain amid surging prices in consumer goods.
  • The Harmonized Tax Law passed last year stipulates that VAT be raised to 11% in 2022 and 12% three years later, from 10% presently.
  • The law also raises income taxes on the rich, scraps a proposal to cut corporate income taxes and introduces carbon taxes, among other measures. Sri Mulyani said the government needed to reform its tax policy to achieve fiscal consolidation plans.
  • She gave an assurance that the government would, through social aid programs, shield low-income groups from the effects of the hike.
  • “Since we will give it back to the people, we still have to prepare the foundation. If not, we will lose this opportunity [to reform tax policy],” Sri Mulyani told audiences during a live broadcast.
  • Raising VAT is expected to aid the government in reinstating a budget deficit cap of below 3% of GDP by 2023.
  • The Indonesian Indigenous Entrepreneurs Association (HIPPI) and Indonesian Chamber of Commerce and Industry (Kadin) have called on the government to ease the implementation of the tax hike.
  • HIPPI Jakarta chairman Sarman Simanjorang said on 9 Mar 22 that businesses hoped the government would postpone the hike amid the uncertainty of the global economy.
  • He went on to say that within a few months, Indonesia would enter the holy month of Ramadan, which will be followed by increased prices of many commodities. “If the VAT hike is carried out, it will burden the public,” he said.
  • Kadin chairman Arsjad Rasjid on 15 Mar 22 suggested the government either waive or cut VAT on services in education, health care, other strategic economic activities and staple foods such as cooking oil and sugar.
  • Arsjad also emphasized the importance of increasing the government’s spending on social and cash aid to help the less fortunate meet their daily needs.

External Link :