Ilona Estherina, Jakarta – As the January 2025 deadline for the value-added tax (VAT) increase from 11% to 12% looms, uncertainty persists regarding the policy's implementation. Despite widespread public opposition, the government and the House of Representatives (DPR) continue to pass the buck.

Coordinating Minister for Economic Affairs Airlangga Hartarto has said that the decision to postpone the VAT hike is still under discussion. "It will be discussed later," he said at the Parliament Complex, Senayan, Jakarta, on Monday, December 2, 2024.

Previously, he emphasized that the government is merely following the decision of Commission XI of the House of Representatives (DPR), which had initially approved the increase.

"Don't ask the government [about the VAT increase], ask Commission XI, because they made the decision," Airlangga said during the meeting of the Indonesian Chamber of Commerce (Kadin) at the Hotel Mulia Jakarta on Sunday, December 1, 2024.

This statement came in response to calls from Kadin member Richard Effendy Siregar who urged the government to not only cancel the VAT hike but also consider a reduction. Siregar cited the current economic conditions as a reason for these measures.

However, House Commission XI Chair Mukhamad Misbakhun shifted the responsibility back to the government. "We fully leave it in the government's hands," he said.

The VAT increase is mandated by Law Number 7 of 2021 on Tax Regulation Harmonization (UU HPP), which allows for a gradual increase in VAT rates. The initial increase to 11% took effect in April 2022, and the upcoming 12% rate is scheduled for January 2025. This tax hike is expected to impact consumers directly, leading to higher prices for goods and services.

Bhima Yudhistira, Executive Director of the Center of Economic and Law Studies (Celios), has proposed that the government immediately issue a Government Regulation in Lieu of Law (Perpu) to cancel the VAT rate increase, especially given the current economic conditions and declining purchasing power.

"This is an urgent, pressing condition as it threatens the economy. [The government could] just issue a Perpu, cancel the 12% VAT rate in 2025," he said.

– Han Revanda Putra contributed to the writing of this article

Source: https://en.tempo.co/read/1948157/government-and-parliament-pass-the-buck-on-vat-hike-to-1