Anggaran Tekor, PPN Capai Rekor

Summary

The discussion centers on Indonesia's upcoming PPN (VAT) increase from 11% to 12% in January 2025, with concerns raised about its economic impact. Experts argue that the tax hike will likely reduce purchasing power, especially for the middle class, and may worsen inflation. While the government has proposed measures like electricity discounts and reduced insurance premiums, these are viewed as insufficient. Analysts suggest focusing on long-term solutions, including improving non-tax revenues, addressing corruption, and boosting productivity through technology to stabilize the economy and prevent negative consequences for citizens.

Takeaways

• 😀 The Indonesian government plans to raise the Value Added Tax (VAT) from 11% to 12% starting January 1, 2025, to increase state revenues and reduce the national budget deficit.
• 😀 The VAT increase could put additional pressure on middle-class households, especially with inflationary effects on both luxury and essential goods, even if basic needs like rice and eggs are exempt.
• 😀 There are concerns that the VAT increase might not guarantee stability in the prices of essential goods, as market forces and inflation can still drive up costs.
• 😀 Experts suggest that while the government has proposed mitigating policies like electricity discounts and insurance subsidies, these measures may not be enough to shield the middle class from the full impact of the VAT hike.
• 😀 The increase in VAT could negatively impact consumption, as many consumers, especially in the middle class, might adjust their spending to save more in response to higher costs.
• 😀 The government’s growth target for 2025 is at risk, with experts indicating that reduced consumption due to higher prices could make it difficult to achieve the expected economic growth of 5.2%-5.3%.
• 😀 The potential negative effects of the VAT hike include reduced consumer spending, which could further slow down economic activity and harm domestic production.
• 😀 The VAT hike could increase inflation, especially in sectors with volatile pricing like luxury goods, education, and healthcare, thereby reducing the purchasing power of consumers.
• 😀 Experts argue that short-term tax hikes like VAT increases may not be the best solution for fiscal deficits and that long-term strategies, such as improving productivity and optimizing natural resource management, should be prioritized.
• 😀 Alternative revenue-generating strategies suggested include strengthening tax enforcement, addressing corruption, and focusing on industrialization and technological advancement to boost long-term economic growth.

Q & A

What is the reason behind the Indonesian government's decision to raise the VAT (PPN) from 11% to 12% in 2025?

The government aims to increase state revenue and reduce the budget deficit. The increase in VAT is expected to help boost fiscal resources.

How will the increase in VAT potentially affect the middle class?

The increase in VAT may place additional pressure on the middle class, particularly those in the middle-income bracket, as it could raise the costs of goods and services. Although essential goods like rice and eggs are excluded, the broader impact on prices remains a concern.

Can exemptions for essential goods like rice and eggs ensure that prices of these goods will not increase?

There is no guarantee that exemptions will prevent price increases. The market is unpredictable, and even goods considered essential may still experience price hikes due to the overall impact of the VAT increase on production and distribution costs.

What concerns do business owners, especially those in the luxury goods market, have about the VAT increase?

Business owners in the luxury goods sector are worried that the VAT increase will lead to higher prices for their products, which could reduce consumer demand. This may also trigger inflationary pressures across the economy.

How does the potential VAT increase impact household consumption?

The increase in VAT is expected to reduce household consumption, particularly for middle-income and lower-income households. People are likely to save more and spend less, leading to a slowdown in economic activity and potentially affecting overall growth.

What role does inflation play in this context, and how is it expected to interact with the VAT increase?

Inflation is likely to be exacerbated by the VAT increase. Even if prices of essential goods do not rise significantly, the overall price sensitivity in the market means that other goods will likely see price hikes, further fueling inflation.

How effective are the government's proposed economic measures, such as the 445.3 trillion rupiah stimulus package, in addressing the impact of the VAT hike?

The government's proposed measures, such as subsidies and incentives, are intended to mitigate the impact on lower- and middle-income households. However, their effectiveness is uncertain, especially with short-term relief programs like a two-month electricity discount, which may not sufficiently address the long-term economic consequences of the VAT increase.

How might government interventions fail to prevent price hikes and inflation despite the proposed relief measures?

Government interventions might be insufficient because market dynamics, such as changes in commodity prices, could overwhelm short-term relief efforts. If producers adjust prices in response to the VAT increase, inflation could still rise, affecting the cost of living even with subsidies.

What alternative solutions to the VAT increase does Rizal suggest to address the budget deficit?

Rizal suggests focusing on optimizing non-tax revenue, particularly from natural resources, and promoting industrialization to increase long-term economic productivity. Additionally, better enforcement to recover misallocated state funds, such as from corruption, could be used to address the deficit.

What are the risks associated with the VAT increase, according to the discussion?

The primary risk is that the VAT increase could create a 'high-cost economy,' where producers pass on the cost of the tax to consumers, leading to higher prices. This could worsen the purchasing power of the middle class and decrease consumption, which is a key driver of economic growth.