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Government to impose 12% VAT starting next year

Jakarta Globe - March 8, 2024

Arnoldus Kristianus, Jakarta – The government is set to implement a 12 percent value-added tax (VAT) next year, marking a 1 percentage point increase from the current VAT rate. This adjustment is in accordance with the law on the harmonization of taxation regulations issued in 2022, a senior official said on Friday.

Indonesia is gearing up for a change in leadership, with Defense Minister Prabowo Subianto projected to win the February 14 election, according to independent pollsters sampling from thousands of polling stations. The new president is expected to take office in October.

During his campaign, Prabowo pledged to defend the legacy of President Joko Widodo and assured the continuity of his policies. The candidate has formed a partnership with the president's son, Gibran Rakabuming Raka, as his running mate.

"The Indonesian people have made their choice, namely the continuation of current government programs, including VAT policies," Chief Economic Minister Airlangga Hartarto said in Jakarta.

The 2022 law mandates the phased implementation of VAT hikes, with the 12 percent rate set to be imposed by January 1, 2025, at the latest. The VAT was previously raised from 10 percent to 11 percent on April 1, 2022.

Airlangga said the government is currently formulating macro-economic and fiscal policies, including the new VAT rate, as the basis for drafting the 2025 state budget.

While the new VAT rate is expected to boost state revenues, the final 2025 draft budget won't be ready before the General Election Commission (KPU) formally announces the winner of the presidential election scheduled for March 20, Airlangga explained.

Airlangga is also the chairman of the Golkar Party, which nominated Gibran as Prabowo's running mate and joined the coalition supporting their candidacy.

Source: https://jakartaglobe.id/business/government-to-impose-12-vat-starting-next-yea