Arnoldus Kristianus, Jakarta – The value-added tax (VAT) hike to 12 percent will officially enter into force in January 1, according to Chief Economic Affairs Minister Airlangga Hartarto.

The government, however, will make staple goods VAT-free.

"As scheduled and mandated by the [2021] taxation law, we will officially raise the VAT to 12 percent starting on January 1," Airlangga told reporters in Jakarta on Monday.

"But staple food like rice, meat, fish, eggs, vegetables, milk, sugar for consumption, among others, will all not be subject to VAT," Airlangga said.

People will also not need to pay for VAT for healthcare, financial services, insurance, public transportation, and polio vaccines.

The government has also prepared economic packages for low-income families. This includes granting a one-percent VAT discount for MinyaKita, the affordable cooking oil intended for low-income families. In other words, the government will cover the one percentage point increase in the VAT.

"With a 1-percent discount, the VAT for MinyaKita will not rise to 12 percent. The same goes for flour and sugar used for industrial production purposes. So the VAT rates for these products will stand at 11 percent," Airlangga said.

The VAT plans have been making headlines over the past weeks following public opposition. Experts have warned that a higher VAT can deal a fatal blow to the economy and further shrink Indonesia's middle-class population.

Source: https://jakartaglobe.id/business/indonesia-to-raise-vat-to-12-percent-on-january-