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The 12% Luxury Goods Tax (PPN) Has The Potential To Generate An Additional Revenue Of Only Rp3 Trillion For The State
Thursday, 09 Jan 2025
The Director General of Taxes at the Ministry of Finance, Suryo Utomo, has indicated that the potential increase in state revenue from the implementation of a 12% Value Added Tax (VAT) specifically on luxury goods is not particularly significant. Suryo stated that he has conducted calculations with the Head of the Fiscal Policy Agency at the Ministry of Finance, Febrio Nathan Kacaribu, regarding the potential additional revenue stemming from President Prabowo Subianto's decision to apply the 12% VAT solely to luxury items. "Our calculations with Mr. Febrio yesterday indicated a range of approximately IDR 1.5 trillion to IDR 3 trillion," Suryo remarked during a press conference at the Ministry of Finance office in Central Jakarta on Monday, January 6, 2025. He also expressed his commitment to broadening the tax base to maximize state revenue. The Directorate General of Taxes will intensify efforts to ensure that every taxpayer fulfills their tax obligations and will explore new sources of revenue.
To achieve this, Suryo acknowledged the necessity of collaboration. He emphasized the importance of coordinating with relevant parties. "We are also engaging in joint efforts to identify new sources that have not been adequately covered until now," he explained.
It is noteworthy that the implementation of the 12% VAT on luxury goods is projected to reduce state revenue by up to IDR 71.8 trillion. Deputy Speaker of the House of Representatives, Sufmi Dasco Ahmad, clarified that the potential state revenue from the 12% VAT on luxury goods is only around IDR 3.2 trillion. In contrast, he noted that if the 12% VAT were applied to all goods and services, the potential revenue could reach IDR 75 trillion. "This presents a challenging choice for the government," Dasco stated in his remarks, as quoted on Wednesday, January 1, 2025. On another note, President Prabowo Subianto assured that the government would continue to provide a fiscal incentive package amounting to IDR 38.6 trillion, even though the 12% VAT will only apply to luxury goods. This fiscal incentive package includes tax discounts for home purchases, electricity discounts, and government coverage of employee salary taxes.
