Dampak Kenaikan PPN 12%

Summary

The discussion revolves around the government's plan to increase VAT from 11% to 12% starting in January 2025. Economists raise concerns about the negative impact on middle and lower-income groups, as well as the broader economy, with possible reductions in household consumption and GDP growth. While the government justifies the hike as necessary for strengthening the national budget amid global economic uncertainties, experts suggest alternative tax solutions, such as adjusting export taxes. The debate also touches on whether the government should offer compensation to ease the impact on affected citizens.

Takeaways

• 😀 The planned increase in VAT from 11% to 12% starting January 2025 has sparked various reactions, with concerns about the burden on people's living costs, especially those in lower-income groups.
• 😀 The government justifies the VAT increase as necessary to strengthen the state budget (APBN) and manage economic and geopolitical uncertainties, with the aim of increasing revenue to meet rising expenditure.
• 😀 VAT contributes significantly to Indonesia's tax revenues, accounting for about 35% to 38% of total tax collections, making it a crucial revenue source for the government.
• 😀 The government's target for total revenue in 2025 is IDR 945 trillion, which is substantial and is partly the reason behind the tax increase.
• 😀 However, the situation has changed compared to previous years when the tax hike was planned. Economic conditions are now less favorable, which will likely hurt the purchasing power of middle- and lower-income groups.
• 😀 Economic growth has been sluggish, and there are concerns that the VAT hike will exacerbate these issues by further diminishing people's purchasing power, especially as household consumption is already below economic growth.
• 😀 The tax increase will have a ripple effect on household consumption, with an expected contraction of 0.26%, which is a significant concern given that consumption drives the Indonesian economy.
• 😀 While VAT will not apply to basic needs, there are fears that overall production costs will rise, as businesses will face higher costs, potentially leading to decreased demand and production.
• 😀 The government has not yet taken alternative measures, such as increasing other taxes (e.g., tobacco or mining exports), even though these could provide a more targeted solution with fewer negative side effects.
• 😀 Experts suggest that the government might need to offer compensatory measures, such as subsidies or incentives, to mitigate the negative impacts of the VAT increase on the public, especially the middle and lower-income groups.

Q & A

What is the government's reason for raising the Value Added Tax (PPN) to 12%?

The government argues that the tax increase is necessary to strengthen the state budget (APBN) and address global economic and geopolitical uncertainties.

How much does PPN contribute to the government's total tax revenue?

PPN contributes about 35% to 38% of the total tax revenue in Indonesia.

What concerns do economists have regarding the PPN increase?

Economists are concerned that the tax hike could increase the financial burden on consumers, particularly those from middle to lower-income groups, and could negatively affect household consumption and economic growth.

What potential impact could the PPN increase have on economic growth?

The PPN increase could reduce household consumption and business production, potentially slowing down economic growth. Some estimates suggest it could reduce GDP growth by 0.17%.

What alternative tax measures could the government explore instead of raising PPN?

The government could consider increasing export taxes on commodities like coal or introducing higher taxes on sectors such as tobacco. These measures could generate revenue without heavily impacting consumers.

How has household consumption been performing recently in Indonesia?

Household consumption has been growing slower than the overall economy, with several recent quarters showing consumption growth below the rate of economic growth.

What could the government do to alleviate the negative effects of the PPN increase on vulnerable populations?

The government could introduce subsidies, tax reductions on essential services, or other compensatory measures to help mitigate the impact on middle and lower-income groups.

Why is the government insistent on implementing the PPN increase despite the concerns raised by economists?

The government is committed to the tax increase because of a regulation that mandates a rise in PPN to 12% starting in January 2025. The target for tax revenue is set at 945 trillion IDR, making it a significant part of the national budget plan.

What are the potential consequences for businesses due to the PPN hike?

Businesses could face higher production costs, which might lead to reduced demand for their products and lower production volumes. This could ultimately result in layoffs or slower job creation.

Is there a possibility that the government could reconsider the PPN increase?

While it is difficult to alter the law once it is set, experts suggest that a political solution, such as delaying the implementation through a government regulation (Perpu), might be a possible way to address the issue.