[FULL] Analisis Ahli soal PPN 12 Persen, Benarkah Dampaknya Tak Besar ke Inflasi & Tekanan Ekonomi?

Summary

In this discussion, Josua Pardede, Chief Economist of Bank Permata, evaluates the Indonesian government's claim that increasing VAT from 11% to 12% will have a minimal impact on inflation and economic growth. He highlights that previous tax hikes showed only a marginal effect on inflation, with external factors like geopolitical tensions playing a larger role. The government plans significant incentives to offset the VAT increase, but experts argue that more targeted fiscal measures are needed to ensure economic stability, especially for lower-income groups. The conversation suggests the government should consider delaying the VAT increase amidst global uncertainties.

Takeaways

• 😀 The increase in Indonesia’s VAT (PPN) from 11% to 12% is expected to have a minimal impact on inflation, similar to the previous increase from 10% to 11%.
• 😀 Historical data shows that the previous VAT hike caused inflation to rise by only 0.2-0.3%, with experts predicting a similar outcome for the upcoming increase.
• 😀 The government's VAT increase will primarily affect luxury goods, while essential goods, education, and health services will be exempted, minimizing the burden on most consumers.
• 😀 Despite the minimal inflationary impact, other global factors like the Russia-Ukraine war and rising oil prices in 2022 contributed significantly to inflation, indicating a complex economic environment.
• 😀 Josua Pardede, Bank Permata’s Head Economist, emphasized that inflation in 2022 was largely driven by geopolitical tensions and other external factors, not solely by the VAT increase.
• 😀 Global trends show that countries raising their VAT or sales taxes often implement complementary welfare measures to mitigate the impact on consumers. Examples include Germany, Japan, and Malaysia.
• 😀 The Indonesian government has set aside 265.6 trillion IDR for social assistance programs, a strategy that mirrors those used in other countries with similar tax hikes.
• 😀 The impact of VAT increases varies across income groups. While higher-income groups continue spending on luxury goods, lower-income groups, particularly the middle class, are more sensitive to price changes.
• 😀 There has been a shift in consumer spending behavior, with increased spending on leisure and recreation activities, especially among younger people, which has somewhat offset declines in other sectors.
• 😀 While the VAT increase will likely generate additional government revenue (around 20-40 trillion IDR), experts suggest that more robust spending programs and economic stimulus may be needed to support long-term growth, especially in sectors affected by the global economic slowdown.

Q & A

What is the government's claim regarding the impact of the 12% VAT increase on inflation and economic pressure?

The government, specifically the Directorate General of Taxes and Bank Indonesia, claims that the impact of the 12% VAT increase on inflation and economic pressure is minimal. They suggest that the increase would contribute only about 0.2% to inflation, which is not significant enough to severely affect economic growth.

How does the impact of the 12% VAT increase compare to the previous VAT increase from 10% to 11% in 2022?

The impact of the increase from 11% to 12% is expected to be similar to the earlier VAT increase from 10% to 11% in 2022, which resulted in an inflation increase of around 0.2% to 0.3%. The impact is considered minimal, and the government's strategy includes excluding basic necessities from the VAT hike.

What other factors, aside from the VAT increase, contributed to the inflation in 2022?

In addition to the VAT increase, inflation in 2022 was influenced by geopolitical factors, particularly the Russia-Ukraine war, which led to a significant rise in oil prices. The government also raised the price of pertalite (a subsidized fuel) in response to these factors.

What measures has the government taken to mitigate the impact of the VAT increase on lower-income groups?

The government has introduced a package of incentives, including exemptions for basic goods, health, and educational services. Additionally, it is focusing the VAT increase primarily on luxury goods consumed by the upper-income groups, while aiming to shield the lower-income population from the direct impact.

How do VAT increases and government incentives compare in other countries?

It is common practice in many countries, both developed and developing, to accompany VAT increases with government incentives. For example, Germany raised VAT from 16% to 19% in 2007 and provided income tax reductions and social programs. Similarly, Japan increased VAT in 2019, offering subsidies for education and direct financial assistance for businesses.

How does the government plan to use the additional VAT revenue generated by the 12% increase?

The government plans to use the additional VAT revenue to support public services such as education, healthcare, and social assistance. However, the exact allocation of these funds is still under review, and the government aims to ensure that spending is focused on benefiting the public.

What challenges does the Indonesian government face in increasing VAT in 2024?

The government faces challenges such as a sluggish global economy, with slowing growth in China and the U.S., which could impact Indonesia's economic recovery. Additionally, geopolitical uncertainties, such as tensions in the Middle East, could further complicate the situation. The government needs to balance the VAT increase with effective economic stimulus measures to avoid excessive strain on lower-income groups.

How has domestic consumption in Indonesia been affected by economic pressures?

Domestic consumption has been mixed. While certain sectors, such as luxury goods and services (e.g., hotels, restaurants, and recreation), have experienced strong growth, consumption patterns in other areas have been weaker. This divergence is attributed to differences in income levels, with higher-income groups maintaining spending levels while lower-income groups are more affected by inflation.

How does the government plan to address the economic slowdown and the pressure on consumption?

The government plans to address the economic slowdown through targeted stimulus programs, such as creating jobs in labor-intensive sectors, especially for those who have been laid off. They aim to increase public spending effectively and focus on programs that boost productivity and welfare.

Why do experts believe the increase in VAT may not significantly harm the economy?

Experts suggest that the VAT increase's impact on inflation is expected to be marginal, and the economy is likely to remain resilient due to government measures, such as exemptions for basic goods and targeted fiscal support. Additionally, global economic conditions, while challenging, are not expected to lead to a dramatic downturn in consumption.