Mita Amalia Hapsari, Jakarta – The government is now trying to find the middle ground following huge backlash to the 12-percent value added tax (VAT) plans, according to President Prabowo's economic advisor Mari Elka Pangestu.

A 12-percent VAT is set to enter into force next month, up from the current 11 percent. The upcoming VAT hike has sparked backlash from experts and public. Lawmaker Mukhamad Misbakhun recently said that the government would proceed with the plan despite the strong public opposition, although the VAT would only apply to luxury goods.

As Indonesia inches closer to the VAT's entry into force, Prabowo consulted with members of the National Economic Council at the State Palace in Jakarta on Thursday. The council's deputy chair Mari Elka told reporters that Prabowo had been putting his thinking cap on to find a middle ground.

"Mr. Prabowo is looking for the best way possible to generate state revenue while also taking into account the private sector and the people's purchasing power. The government will later announce the scheme that [Prabowo has picked] later," Mari told reporters.

"We have agreed to strike the balance by applying the [12-percent] VAT to luxury goods. But the government will announce the details on that."

Calls have been mounting for the government to search for other alternatives to boost the state revenue. Analyst Rizal Taufikurahman warned that the VAT increase from the current 11 percent to 12 percent could slash the country's gross domestic product (GDP) by Rp 21 trillion or $1.3 billion. The Indonesian Affiliate Global Retailers Association (AGRA) is urging lawmakers to pass the overdue asset forfeiture bill, saying that the government would get much more money by seizing the assets lost in corruption.

Source: https://jakartaglobe.id/business/govt-tries-to-find-middle-ground-amid-12-pct-vat-concern