Government Plans 2025 State Budget with Assumed VAT Rate Increase to 12%

JAKARTA. The government stated that the preparation of the State Budget (APBN) target for 2025 has used the assumption that the Value Added Tax (VAT) rate will increase to 12%.

The basis for this assumption refers to Article 7 paragraph (1) of Law Number 7 of 2021, concerning Harmonisation of Tax Regulations (HPP).

The regulation mentions that the VAT rate will increase from 11% to 12% no later than January 2025. However, as quoted from Kontan.co.id, the government admitted that it could cancel the mandatory, depending on the new government policy.

As for the 2025 State Budget Draft, which is currently being discussed between the government and the House of Representatives (DPR), it is known that the tax ratio target or the ratio between tax revenue and Gross Domestic Product (GDP) is set in the range of 10.09%-10.29%.

In preparing the 2025 State Budget posture, the government is coordinating with the House of Representatives and opening communication with the transition team formed by President-elect Prabowo Subianto.

Coordinating Minister for Economic Affairs Airlangga Hartarto said economic conditions were one of the government's concerns before deciding on the VAT rate increase.

For information, until the end of June 2024, the realization of domestic VAT revenue was recorded at IDR 193.06 trillion or 21.60% of the total tax revenue of 893.8 trillion. Meanwhile, when compared to the realization in the same period in 2023, this amount grew minus 11%. (ASP/KEN)