Postpone VAT Increase

The business world, economists and parliament asked the government to cancel the planned increase in value added tax (VAT) next year.

The increase in VAT will hit the purchasing power of the lower middle class who have not yet recovered from the pandemic. If the VAT rate is forced to increase, economic growth could contract again. To increase state revenue, the government is better off using the extensification method or expanding the taxpayer base. Meanwhile, the intensification method by increasing the VAT rate is only appropriate when the tax base is large enough and economic conditions are growing rapidly so as not to experience overheating. The request was conveyed by Deputy Chairperson of the Indonesian Employers Association (Apindo) Shinta Widjaja Kamdani, Deputy Chairperson of the Indonesian Chamber of Commerce and Industry for Trade Benny Soetrisno, Head of Finance and Banking Division of the Indonesian Young Entrepreneurs Association (Hipmi) Ajib Hamdani, and Deputy Speaker of the Indonesian House of Representatives Abdul Muhaimin Iskandar. . The same thing was conveyed by DPR member from the Golkar Party faction Mukhamad Misbakhun, researcher from the Center of Reform on Economics (Core) Indonesia Yusuf Rendy Manilet, economist from the Institute for Development of Economics and Finance (Indef) Tauhid Ahmad, and Chief Economist at PT Bank Mandiri (Persero) Tbk. Andry Asmoro. They were separately contacted by Investor Daily in Jakarta, last weekend, regarding the government's plan to increase VAT rates in 2022. This plan was raised at the 2021 Central Development Coordination Meeting, in line with the outlook for tax revenues in 2022 of Rp 1,499.3 trillion to Rp 1,528.7 trillion. This figure is up 8.37-8.42 percent from this year's projection of Rp. 1,444.5 trillion. The Coordinating Minister for the Economy, Airlangga Hartarto, previously revealed that the government would immediately submit a revision to the rules for increasing the VAT rate to the DPR. If approved, the VAT rate charged to consumers could be higher than the usual rate of 10%.

|•SOURCE•| Image :dreamstime |

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