Francisca Christy Rosana, Jakarta – The government officially raised the value-added tax (VAT) from 10 percent to 11 percent starting April 1, 2022, as mandated in Article 7 of Law No. 7 of 2021 concerning the Harmonization of Tax Regulations (UU HPP).
"This is an integral part of tax reform and fiscal consolidation as the foundation for a more just, optimal, and sustainable tax system," said the Finance Ministry spokesperson Rahayu Puspasari in a press statement, Thursday night, March 31.
The VAT rate adjustment is in line with the decrease in the income tax rate (PPh) for individuals whose income of up to Rp60 million per year from 15 percent to 5 percent. The government also dropped taxes for MSMEs with a turnover of up to Rp500 million and applied a final VAT at a certain amount.
Director of the Center of Economic and Law Studies (Celios) Bhima Yudhistira Adhinegara opined that the hike in the VAT would affect the prices of goods and services. Apart from goods and services exempted from the tax, including non-premium basic necessities and education services, prices of goods and services that are subject to VAT will increase.
"The impact of this VAT hike is quite broad because it applies to almost all types of goods, except basic necessities, such as electronics, phone credit, online advertising or adsense, social media advertising, automotive parts, and cosmetics. Everything that becomes the object of VAT will increase," said Bhima.