The Celios Research Indicates That The Economy Could Decline By 4.09 Percent If The Value Added Tax (VAT) Is Increased To 12 Percent

The Center for Economic and Law Studies (Celios) assesses that the increase in the Value Added Tax (VAT) to 12 percent will have a detrimental effect on Indonesia's economy.

This policy is believed to not only diminish the purchasing power of the public but also has the potential to slow down national economic growth in 2025.

Wahyudi Askar, the Director of Fiscal Justice at Celios, indicated that with this increase, economic growth is projected to reach only 4.09 percent.

"Our economic growth will decline from previous predictions, only achieving 4.09 percent compared to the anticipated growth of 5.1 percent for 2025 from various institutions," stated Media during a discussion held at the Indonesian Legal Aid Foundation (YLBHI) on Friday, November 29.

In his presentation, Media also highlighted a significant decrease in various key economic components as a result of the VAT increase.

Simulations conducted indicate that the VAT hike could lead to a reduction in economic output by up to Rp79 trillion.

Household consumption, which is the primary driver of Gross Domestic Product (GDP), is also expected to contract by Rp40 trillion. Additionally, the export sector is projected to be affected with a decline of Rp11 trillion.

"It turns out that when the VAT is significantly raised to 12 percent, our economic output could decrease by Rp79 trillion, with GDP also diminishing by Rp65 trillion, and household consumption dropping by Rp40 trillion. Notably, exports will also experience a contraction of Rp11 trillion," explained Media.

Tag: Gross Domestic Product Value Added Tax Wahyudi Askar