Jakarta, Indonesia Sentinel — Indonesia’s government is gearing up to implement its third tax amnesty program in 2025, a move officially included in the National Legislation Program (Prolegnas). The Indonesia Tax Amnesty, designed to recover unpaid taxes from high-income taxpayers, comes at a time when the government is also planning to raise the Value-Added Tax (VAT) to 12%. This dual strategy has sparked concerns about fairness and its potential impact on the wider economy.
Indonesia Tax Amnesty Sparks Unequal Perception
The tax amnesty program historically targets wealthier taxpayers, providing them with an opportunity to settle their tax obligations with reduced penalties. During the 2022 tax amnesty, several ultra-rich individuals, including those with assets exceeding IDR 1 trillion, benefited from government leniency. In contrast, the impending VAT hike will directly impact all levels of society, especially middle- and lower-income groups, fueling perceptions of economic inequality.
“The tax amnesty is seen as favoring the rich, while VAT increases burden everyone, including the poor,” said Wahyu Widodo, an economist from Diponegoro University. He noted that this juxtaposition is intensifying public frustration, as reflected in heated discussions on social media.
Slowing Consumption and Economic Growth
The announcement of the Indonesia Tax Amnesty comes amid signs of slowing household consumption, a key driver of Indonesia’s economy, contributing over 53% to GDP. The Central Statistics Agency (BPS) reported that household consumption grew by just 4.91% in the third quarter of 2024, down from 4.93% in the previous quarter. This sluggish performance has contributed to a decline in overall economic growth, which dropped to 4.95% in Q3 2024, compared to 5.11% in Q2.
Monetary expert Telisa Aulia Falianty from the University of Indonesia expressed concerns about the planned VAT hike, warning that it could further erode consumer purchasing power. “The 12% VAT increase risks worsening an already fragile economic situation,” she said.
Legislative Controversy Surrounding Indonesia Tax Amnesty
The sudden inclusion of the Indonesia Tax Amnesty in the Prolegnas Priority list has also raised questions about transparency. Misbakhun, Chairman of the House of Representatives (DPR) Commission XI, revealed that the proposal was added unexpectedly during a legislative session.
“As the commission that oversees tax-related policies, we felt obligated to take the lead on this issue,” Misbakhun explained. However, critics argue that the rushed process reflects poorly on the government’s commitment to inclusive policymaking.
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A Need for Balanced Fiscal Policies
While the Indonesia Tax Amnesty and VAT hike are aimed at bolstering state revenue, public trust in these policies depends on how equitably they are implemented. Experts emphasize the need for safeguards to ensure that lower-income groups are not disproportionately affected by fiscal reforms.
The government must strike a balance between addressing budgetary needs and ensuring fairness, as missteps could further exacerbate public dissatisfaction. Moving forward, clearer communication and targeted measures will be essential for restoring confidence and achieving sustainable economic growth.
(Becky)
