Indonesia Increases PPN Rate to 12% from January 2025: What We Know So Far
In a significant shift, Indonesia’s Value Added Tax (VAT) rate, known as Pajak Pertambahan Nilai (PPN), will rise to 12% starting January 1, 2025. This change affects all transactions, regardless of whether they are conducted in cash or non-cash form. Here’s what you need to know:
Key Takeaways:
- PPN rate increases to 12% as of January 1, 2025
- Consumers only pay PPN on the goods or services they purchase; non-cash transactions like QRIS or other non-cash payments do not incur additional PPN charges
- Bank Indonesia states that any PPN imposed will only apply to the service fee charged by the payment service provider
Understanding the PPN Increase
The Indonesian government has raised the PPN rate from 11% to 12%. This change, while significant, is not expected to have a substantial impact on inflation or consumer spending power. According to the Directorate General of Taxes (DJP), the current inflation rate stands at a low 1.6%, and the increased PPN rate is projected to contribute only a minimal 0.2% to inflation.
Indonesia’s Stance on PPN Increase
The directorate also emphasized that the 2022 tax hike from 10% to 11% did not cause a significant surge in prices or erosion of purchasing power. Officials expect the latest tax increase to follow a similar pattern, maintaining inflation within the government’s target range of 1.5% to 3.5% for the 2025 state budget.
Contrasting Views from Business Sector
While the government dismisses the PPN hike’s potential impact, business owners and bankers hold opposing views. Efdinal Alamsyah, Direktor Kepatuhan of PT Bank Oke Indonesia Tbk. (DNAR), believes the increased tax will drive up prices, squeezing consumer purchasing power and potentially impacting consumer credit demand.
Meanwhile, Welly Yandoko, Executive Vice President of Consumer Loan at PT Bank Central Asia Tbk. (BBCA), expects the tax hike to pose a challenge to the sales of primary properties in 2025 due to rising construction costs and economic uncertainty.
What’s Next?
As the PPN rate increase takes effect in 2025, consumers and businesses alike should monitor its impact on prices and spending power. The differing perspectives from the government and the business sector underscore the importance of paying close attention to how the new tax regime plays out in the coming months.
Sumber: CNBC Indonesia
