VAT Rises to 12%: DGT Assures Proceeds Will Benefit the Community

JAKARTA. The Directorate General of Taxes (DGT) has addressed the increase in the Value Added Tax (VAT) rate from 11% to 12%, effective January 1, 2025.

According to Dwi Astuti, Director of the Director of Extension, Services, and Public Relations of the Directorate General of Taxes (DGT) under the Ministry of Finance, state revenue derived from taxes, including VAT, will be returned to the public in the form of various facilities and development programs.

For reference, the VAT increase to 12% is mandated by the Harmonization of Tax Regulations Law (HPP Law). However, some members of the public have urged the government to postpone the hike, citing its perceived misalignment with current economic conditions.

Nevertheless, Dwi stated, as quoted by cnnindonesia.com, that from the VAT rate adjustment, the government will secure revenue to fund various programs, including assistance programs, subsidies, and tax facilities.

Here are various assistance programs that will be provided:

• Direct Cash Assistance (BLT)
• Family Hope Program (PKH)
• Staple Food Card Program
• Smart Indonesia Program (PIP)
• And more.

Subsidies for the Public

Some examples of subsidies provided by the government include:

• Electricity Subsidies
• 3kg LPG Subsidies
• Fuel Subsidies
• Fertilizer Subsidies

Types of Tax Incentives

Here are some of the tax facilities provided, including:

First, Income Tax Exemption for micro, small, and medium enterprises (UMKM) with a revenue of up to IDR 500 million. Second, Expansion of the lowest taxable income layer (5% rate) from a maximum of IDR 50 million to IDR 60 million.

Third, VAT exemption facilities for basic necessities such as rice, grain, corn, sago, soybeans, salt, meat, eggs, milk, fruits, and vegetables. Fourth, VAT exemption facilities for services such as health services, social services, financial services, insurance services, education services, public transportation services, and employment services.

Option to Postpone or Reduce VAT Rate

Meanwhile, according to the Deputy Chairman of Commission XI, Dolfie Othniel Fredric Palit, the government actually has the option to postpone the VAT increase to 12% even though it has already been established in the Harmonization of Tax Regulations (HPP) Law.

This is because, under Article 7 paragraph (3) of the HPP Law, the government is granted the authority to change the VAT rate to a minimum of 5% without needing to amend the law. Instead, the government only needs to issue a Presidential Regulation. (ASP/KEN)