Govt seeks to provide inclusive stimuli as VAT rate increases: CORE

Jakarta (ANTARA) - The government is seeking to provide inclusive stimuli to mitigate the impact of the increase in the value-added tax (VAT) rate to 12 percent, according to the Center of Reform on Economics (CORE) Indonesia.

"It targets all groups from all income brackets, low-income, middle-income, and high-income," CORE Indonesia researcher Yusuf Rendy Manilet told ANTARA here on Wednesday.

One of the stimuli is the 50 percent electricity discount provided to subscribers of 2,200 VA and below electricity in January and February 2025, which is deemed one of the policies with huge benefits.

This is because, on average, the electricity spending of people, especially the lower-middle income class, is quite high.

"However, the issue is the relatively limited period given by the government for this discount," he pointed out.

During the COVID-19 pandemic, the government provided electricity discounts for nine months, with certain groups even given a 100 percent discount. Nevertheless, the government has been able to maintain economic growth since 2021.

Manilet assessed that although several incentives provided by the government to cushion the impact of the VAT rate increase are already good, the coverage is still limited as they can only be implemented for those working in the formal sector.

Meanwhile, several people from the lower-middle income group work in the informal sector. Thus, they cannot get the tax incentives from the government.

Furthermore, he spoke about unemployment insurance, which is considered unsuitable, especially if aimed at protecting people's purchasing power.

"This is because the incentive is provided when people or the middle-income group lose their jobs. In fact, it must be provided by the government to prevent them from losing their job," he remarked.

On Monday, the Indonesian government announced that the increase in the VAT rate from 11 percent to 12 percent will be officially applied, effective January 1, 2025.

Despite the increase, the government will continue providing the VAT exemption facility for strategic goods and services.