Yustinus Paat, Jakarta – Deputy Chair of Commission XI of the House of Representatives (DPR), Mohamad Hekal, said that no changes or delays to the upcoming Value Added Tax (VAT) increase are planned, despite growing calls for a postponement.

Hekal said any changes to the policy would only be considered after President Prabowo Subianto returned to Indonesia on Saturday, Nov. 23. He added that delaying the VAT hike would require a mutual agreement between the DPR and the government, as the policy is already mandated by law.

The government intends to raise VAT to 12 percent starting in January 2025, in line with Law Number 7 of 2021 on Tax Regulation Harmonization. However, the proposal has drawn widespread criticism, with concerns from both the public and businesses about its potential impact on purchasing power and economic activity.

The VAT increase has been implemented gradually, beginning at 10 percent in 2022, rising to 11 percent in 2023, and reaching 12 percent in 2025. Hekal emphasized that this gradual approach was designed to help the public adjust.

As "compensation", the corporate income tax (CIT) rate was reduced from 25 percent to 22 percent. "There must be a 'give and take,' and in this case, the 'give' was the reduction in the CIT rate," Hekal explained.

Despite concerns over the VAT hike's potential effects, Hekal said that any changes could only be considered during the State Budget deliberations scheduled for August 2025. For now, the 12 percent VAT increase remains a legal obligation and must be implemented on January 1, 2025.

"The VAT increase is mandated by law, and while it may be discussed during the State Budget deliberations, for now, it must be implemented as planned," he concluded.

Source: https://jakartaglobe.id/news/dpr-deputy-chair-confirms-vat-increase-will-proceed-as-schedule