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KOMPAS.com/M ZAENUDDIN
PPN Of 12 Percent To Take Effect Soon; DPR Urges Government Not To Sacrifice Citizens For Fiscal Balance
Wednesday, 18 Dec 2024
Deputy Chairman of Commission XI of the Indonesian House of Representatives, Hanif Dhakiri, expressed his concerns regarding the proposed increase in the Value Added Tax (VAT) to 12 percent, emphasizing that such a policy should not compromise the welfare of the populace. He stated that Commission XI has a responsibility to remind the government about the implications of this policy. "The government must ensure that this policy is fair, accountable, and growth-oriented, accompanied by measures to optimize other tax revenues," Hanif remarked in a conversation with Kompas.com on Wednesday, December 18, 2024. He further added, "Commission XI has the duty to ensure that fiscal balance is not achieved at the expense of the people's welfare."
Hanif highlighted the necessity for the government to consider the broader economic impact of this policy, which is set to take effect on January 1, 2025. He noted that the informal sector currently accounts for 59 percent of employment in Indonesia. He pointed out that the regressive nature of the VAT increase would not only affect the upper class but also the lower class, as it is likely to lead to price increases for various commodities that are also consumed by lower-income groups. "This means that the tax burden will be disproportionately heavier for low-income earners. Serious measures are needed to enhance tax compliance among higher-income sectors and corporations, rather than merely increasing rates for consumers," he stated.
Additionally, Hanif urged the government to implement mitigation strategies to prevent a significant downturn in Indonesia's economy following the VAT increase. He referenced warnings from the International Monetary Fund (IMF) regarding a global economic slowdown projected at 3.2 percent in 2024, while Bank Indonesia anticipates that Indonesia's economic growth may only reach between 4.9 and 5.1 percent. "Therefore, the VAT increase must be accompanied by other fiscal incentives to maintain the momentum of economic recovery, such as subsidies for micro, small, and medium enterprises (MSMEs), social protection, and investment strengthening," he concluded.
