Businessicy – Adhi S Lukman, the Chairman of the Indonesian Food and Beverage Producers Association (GAPMMI), has urged the government to reconsider the planned increase of the Value Added Tax (VAT) to 12% in 2025.
“To the government, it would be prudent to review the 12% VAT rate as its impact on our economy could be significant,” Adhi stated in Jakarta on Monday, August 19, 2024.
Reflecting on the past when VAT was raised from 10% to 11%. Adhi noted that this policy significantly disrupted sales in the first three months of its implementation. Without government intervention through direct cash assistance (BLT). Adhi believes that sales figures for food and beverage products would have declined further.
“Thus, the 12% VAT and other related measures need to be reconsidered. I hope the government will take a long-term view. It would be better if the industry could first grow, with the condition that consumer welfare is also maintained,” he emphasized.
Adhi suggested that the government should focus on achieving substantial economic growth. So that national revenue through income taxes (PPh Pasal 21) and VAT could improve.
“For us, compliance with VAT is crucial. Currently, compliance is only around 60%. If we achieve 100% compliance, government revenue will automatically increase. There is no need for an immediate VAT hike. Our priority should be to ensure full compliance,” he said.
According to him, the government should encourage all segments of society to meet their tax obligations to prevent tax evasion.
“It shouldn’t be a case of some paying while others don’t. If one party evades payment, it undermines others who comply, making it less competitive. Everyone should fulfill their tax obligations,” he added.
Therefore, Adhi is requesting that the government delay the 12% VAT increase. The proposed sugar-sweetened beverage tax (MBDK) set to be implemented next year.
“We have discussed this with various government agencies including the Fiscal Policy Agency (BKF), Ministry of Industry, Customs and Excise, and Ministry of Finance. However, the discussions have not yet led to a formal invitation to address these concerns,” he explained.
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Previously, Roy Nicholas Mandey, the Chairman of the Indonesian Retail Entrepreneurs Association (APRINDO). Also called for the government to postpone the planned increase in VAT to 12%.
“If there is no official statement about the delay, and although I have heard about it, there is no certainty yet. Hence, we strongly request the government to consider postponing the VAT increase.” Roy said in Jakarta on Wednesday, August 14, 2024.
The government plans to raise the VAT rate to 12% by 2025. According to Roy, if the 12% VAT is implemented, it will likely lead to increased prices in modern retail.
“Prices are expected to rise in Q4 if the VAT increase proceeds. Prices will likely go up 2-3 months in advance to avoid unsold stock after the VAT hike takes effect,” he added.
For context, the VAT increase to 12% is part of the government’s tax adjustment plans outlined in Law No. 7 of 2021 on Harmonization of Tax Regulations (UU HPP). According to Article 7, Paragraph 1 of the UU HPP. The VAT rate was increased from 10% to 11% starting April 1, 2022, and is scheduled to rise to 12% by January 1, 2025, at the latest.
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