3-12-2024 (JAKARTA) Indonesia is set to proceed with a contentious value-added tax (VAT) increase next month, raising the rate to 12 percent from the current 11 percent, despite mounting pressure from businesses and labour unions to postpone the measure.
Coordinating Minister for Economic Affairs Airlangga Hartarto confirmed late Tuesday that the official announcement will be made next week, adhering to the previously legislated timeline for implementation in January.
The decision comes amid significant opposition from various sectors of the economy, with business leaders and trade unions voicing concerns about the timing of the increase. Critics argue that the tax hike could further strain consumer spending power during what they describe as an increasingly challenging economic climate.
Government officials maintain that the VAT increase is essential for strengthening the country’s fiscal framework. The state bank has attempted to allay fears by suggesting the impact on economic growth will be minimal.
In an apparent move to soften the blow of the tax increase, Hartarto revealed that the government will simultaneously announce new fiscal stimulus measures. These initiatives will specifically target labour-intensive industries, which have recently experienced significant job losses due to declining global demand.
