VAT 11 Percent Guarantees National Justice and Stability


The government has officially increased the Value Added Tax by 11 percent effective April 1. There was a polemic in the community regarding the VAT increase which was deemed not timely. The government ensured the VAT increase was to maintain justice and national stability.

Didik Yandiawan, Tax Counselor at East Jakarta KPP Madya, said that there are things that have escaped from public discussion, namely Law no. 7/2021 concerning the Harmonization of Tax Regulations (UU HPP), there are several goods and/or services for which the tax payable is not collected partially or completely.

“It can even be exempt from taxation, either temporarily or permanently through derivative regulations,” he said.

According to Didik, Finance Minister Sri Mulyani had previously said that the implementation of the policy was in line with the government’s efforts to support the availability of certain strategic goods and services in the context of national development.

The national development in question includes, among others, necessities that are desperately needed by the people, health services, education services, social services, and others.

To stimulate exports, the 0 percent VAT rate is even applied to exports of taxable tangible goods, exports of taxable intangible goods, and exports of taxable services.

In addition, convenience in collecting VAT will also be provided for certain types of goods or services or certain business sectors through the application of final VAT rates, for example, one percent, two percent, or three percent, of business circulation.

“Therefore, a strong tax regime is to protect Indonesia, not to trouble the people,” Didik quoted Minister of Finance Sri Mulyani as saying.

Previously, the Government had also emphasized that the increase in the VAT rate was aimed at creating a fair and strong tax regime. The restructuring of the state budget is the main focus of the government to return the state budget deficit to the level of three percent by 2023.

Moreover, Didik said Finance Minister Sri Mulyani had previously informed that the increase in Indonesia’s VAT rate was still much lower than in other countries. This is certainly influenced by the position of Indonesia and several other countries which are still struggling in post-pandemic economic recovery.

“If we look at it, compared to many countries in the G20, (and) in the OECD, then we see that the average VAT in that country is around 15 percent, even 15.5 percent,” explained Minister of Finance Sri Mulyani, in March 2022.

On the other hand, General Chairperson of the Indonesian Employers’ Association (Apindo) Hariyadi Sukamdani is optimistic that the government already has its calculations to maintain inflation and increase purchasing power when the 11 percent VAT rate applies.