President Prabowo: 12% VAT Imposed Only on Luxury Goods, Services

President Prabowo Subianto attends the meeting on the 2024 State Budget Closing at the Office of the Ministry of Finance, Jakarta, Tuesday (12/31). (Photo by: Bureau of Press, Media, and Information (BPMI) of the Presidential Secretariat/Muchlis Jr)

The Government has decided that the 1 percent increase in the value-added tax (VAT) rate from 11 percent to 12 percent will be imposed specifically on luxury goods and services. Apart from those goods and services, the VAT rate on other goods and services remains in accordance with the rate that has been in effect since 2022, which is 11 percent.

The decision to increase the VAT rate for luxury goods and services was stated first-hand by President Prabowo Subianto in his press statement at the Office of the Ministry of Finance in Jakarta, Tuesday (12/31).

“For example, private jets are classified as luxury goods that are utilized or used by the upper-class community. Other examples are cruise ships, motor yachts, and very luxurious houses whose value is above those belonging to the middle-class community,” said the President.

Furthermore, the President emphasized that goods and services that constitute basic necessities of the community are still subject to a 0 percent VAT rate.

“Goods and services that are needed by most people remain exempt from VAT, or 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,” he continued.

On that occasion, President Prabowo emphasized that the increase in the VAT rate is mandated by Law Number 7 of 2021 on Harmonization of Tax Regulations. In accordance with the agreement between the Government and the House of Representatives, the increase in the VAT rate is imposed in stages from 10 percent to 11 percent in April 2022, and then raised to 12 percent starting from January 1, 2025.

“This gradual increase is calculated so as not to have a significant impact on people’s purchasing power, inflation, and economic growth,” said the President.

The President emphasized that this tax policy was devised to prioritize people’s interests and create inclusive economic equality. The Government is also committed to providing stimulus packages for the Indonesian people.

“The stimulus packages take many forms, such as 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, 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. The value of all these stimulus packages is Rp38.6 trillion,” he added. (BPMI of Presidential Secretariat/DNS) (TM/MUR)