JAKARTA. The government is conducting a simulation of increasing the Value Added Tax (VAT) rate to 12% in 2025. According to the calculations, raising the VAT rate from 11% to 12% would increase state revenue by IDR 70 trillion.
Quoting kontan.co.id, according to Secretary of the Coordinating Ministry for Economic Affairs Susiwijono Moegiarso, the increase was obtained from the calculation using the assumption of VAT revenue realization in a year of IDR 730 trillion.
"If the potential impact is easy to calculate, an increase from 11% to 12% means an increase of 1%. 1 per 11 is 10%, our total VAT realization for the year is IDR 730 trillion, which means it will add around Rp 70 trillion,’ said Susiwijono.
However, the projected additional revenue does not account for the impact of the VAT increase on industry capabilities. An increase in the tax rate could have significant implications for the capacity of domestic businesses and their activities.
The government will later compare the impact of the VAT increase on revenue growth with its implications for businesses. One consideration will be the realization of economic growth in the second and first quarters of 2024.
As we know, the increase in the VAT rate to 12% is mandated by Law (UU) Number 7 of 2021 concerning Harmonization of Tax Regulations (HPP). According to the regulation, the government will increase the VAT rate to 12% by 1 January 2025.
Previously, Minister of Finance Sri Mulyani had revealed that the decision regarding the increase in the VAT rate to 12% would be left to the new government. (ASP/KEN)
