Press Statement of President of the Republic of Indonesia related to the Announcement of the 12 Percent Increase in VAT Imposed Only on Luxury Goods and Services, at the Office of the Ministry of Finance, Jakarta, Tuesday, December 31, 2024

Bismillahirrahmanirrahim.

Assalamu ’alaikum wa rahmatullahi wa barakatuh,

Good afternoon,

May prosperity be upon all of us,

Shalom,

Salve,

Om swastiastu,

Namo buddhaya,

Greetings of virtue,

Thank you, Ladies and Gentlemen, media crew.

Ladies and Gentlemen,

This afternoon, since about 03.50 [P.M.], I have been attending the Year-End Meeting held by the Minister of Finance and her staff. Today all staff of the Ministry of Finance are monitoring the inflow of money into the Indonesian Government derived from taxation, customs, non-tax state revenue, because exactly at 00.00 A.M. later, the 2024 Fiscal Year will be closed.

Earlier, the Minister of Finance has given me a presentation about the implementation of the 2024 State Budget. And thank God, in the midst of global challenges that are full of uncertainty, full of tension, full of pressure on the whole of the world economy that affects commodity prices, which ultimately affects our income and also affects oil and gas prices, it turns out that we can still manage our state finances prudently, wisely, carefully, and we can still control our deficit within the allowable limits and we can still manage it.

In this matter too, I think it is good to inform you about several points related to the increase in the Value Added Tax (VAT) rate which may still raise doubts or cause a lack of understanding, so that, after coordination and discussion with the Minister of Finance and the staff of several other ministries, I feel necessary to explain the issues related to the 12 percent increase in VAT myself.

So, Ladies and Gentlemen,

The 12 percent increase in the Value Added Tax rate is mandated, ordered by Law Number 7 of 2021 on Harmonization of Tax Regulations. So, in accordance with the agreement between the Indonesian Government and the House of Representatives in 2021, the increase in the VAT rate will be imposed in stages. The increase from 10 percent to 11 percent was already imposed in April 2022. And then, as mandated by the law, the increase will be raised from 11 percent to 12 percent on January 1, 2025 tomorrow. This gradual increase is calculated so as not to have a significant impact on people’s purchasing power, inflation, and economic growth.

Ladies and Gentlemen,

As part of the commitment of the government that I lead and, I believe, also the commitment of the governments of my predecessors, we ensure that every tax policy taken must always prioritize the interests of the people as a whole, protect people’s purchasing power, and encourage economic equality. We are committed to always supporting the people, serving the national interests, and fighting and working for the welfare of the people.

Therefore, as I have said before and as the results of my coordination with the House of Representatives, today the Government has decided that the increase in the VAT rate from 11 percent to 12 percent will only be imposed on luxury goods and services. Let me repeat it so that it is clear. The increase in the VAT rate from 11 percent to 12 percent is only imposed on luxury goods and services, namely certain goods and services that have been subject to the VAT imposed on Luxury Goods which are used by the wealthy, the affluent people, for example: private jets which are classified as luxury goods that are utilized or used by the upper class community, then cruise ships, motor yachts; and very luxurious houses whose value is above those belonging to the middle class community.

This means that on goods and services that are not classified as luxury goods and services, no increase is made in the VAT. The VAT on such goods and services remains the same as the current one, which has been in effect since 2022. Goods and services that are basic necessities for the community remain exempt from VAT or are subject to a 0 percent VAT rate. I repeat, goods and services that are basic necessities for the community remain exempt from VAT or are subject to 0 percent VAT.

The Government has committed to providing stimulus packages worth Rp38.6 trillion as previously announced, for example: food assistance for 16 million recipients in the form of 10 kilograms of food distributed per month, a 50 percent discount for electricity customers with a maximum power of 2,200 volts [amperes], financing for labor-intensive industries, incentives for workers with salaries of up to Rp10 million per month as regulated in Article 21 of the Law on Taxation, then income tax exemption for Micro, Small, and Medium Enterprises with a turnover of less than Rp500 million per year, and so on. So, the total value of all these stimulus packages is Rp38.6 trillion.

Goods and services needed by the most people remain exempt from VAT, or are subject to a 0 percent VAT rate. Such basic necessities are, among others, rice, meat, fish, eggs, vegetables, fresh milk, education services, health services, public transportation services, simple houses, drinking water.

Ladies and Gentlemen,

With this policy, I think it is very clear that the Government will continue to strive to create a fair and pro-people taxation system. More technical matters will be followed up by the relevant ministries and all related institutions.

That concludes my statement. I thank you.

Wassalamu ‘alaikum wa rahmatullahi wa barakatuh,

Shalom,

Salve,

Om shanti, shanti, shanti om,

Namo buddhaya,

Greetings of virtue,

And I wish you a happy new year.

And you see, the Government is still working on this New Year’s Eve. Until 00.00, the Government is still working and most Government officials are standing by in their respective offices.

That concludes my statement. Once again, to all my compatriots, I wish you a happy new year. Let’s welcome the new year with joy, optimism, and confidence that Indonesia will thrive.

I thank you.

End of meeting.

(TM/MUR)