Jakarta, Indonesia Sentinel — Indonesian President Prabowo Subianto has approved the selective implementation of a 12% Value-Added Tax (VAT) set to take effect on January 2025. The government and the House of Representatives (DPR) have emphasized that the tax increase focusing solely on luxury goods to minimize the impact on essential goods and public services.
The decision was confirmed by Mukhamad Misbakhun, Chair of DPR’s Commission XI, following a meeting with President Prabowo at the Presidential Palace in Jakarta on Thursday, December 5, 2024.
The discussion between the government and the DPR concluded that the VAT hike will target specific high-end commodities while excluding basic necessities.
According to CNBC Indonesia, Misbakhun stated that the VAT increase, mandated by existing legislation, will proceed as scheduled. “Based on our discussion with the President, we will adhere to the law, and the 12% VAT will take effect on January 1, 2025,” Misbakhun said.
He further emphasized that the policy would apply selectively to luxury goods, including both domestically produced and imported items.
Sufmi Dasco, Deputy Chair of DPR, elaborated that the 12% VAT will target luxury items such as high-end cars, luxury apartments, and upscale homes. “Luxury cars, luxury apartments, luxury houses—everything in the luxury category,” Dasco explained during a press conference at the Presidential Palace.
Therefore, government assured that essential goods and public services, including healthcare, education, and banking services, will remain exempt from the 12% rate and continue to be taxed at the current 11%. “Basic necessities and public services directly benefiting the population will maintain the current 11% VAT,” Dasco explained.
Additionally, DPR proposal on reducing the VAT on essential goods to ease the burden on low-income families has been responded positively by President Prabowo.
“Regarding the suggestion from our colleagues in the DPR to lower the taxes on basic necessities that directly impact the public, the President stated that the proposal will be considered and reviewed,” said Dasco.
VAT Adjustment Announcement
The official announcement regarding the VAT adjustment will be delivered by Coordinating Minister for Economic Affairs Airlangga Hartarto and Finance Minister Sri Mulyani.
Social Media Uproar Calls for Frugal Living as Indonesia’s VAT Hike to 12%
Hartarto revealed to Kompas on Friday, December 6, that the government plans to unveil a comprehensive economic policy package next week.
The upcoming policy package will not only outline the implementation for the 12% VAT while also designed to support economic growth and safeguard consumer purchasing powers.
The initiative is part of the government’s strategy to boost state revenue amid global economic pressures. The government also highlighting their commitment to protecting low-income households by maintaining exemptions for essential goods and critical services.
(Raidi/Agung)
