Headline:
Indonesia: Former Minister and Gerakan Nurani Bangsa Urge Govt. to Scrap 12% VAT Hike
Subheading:
Rise in Value-Added Tax (VAT) Set to Further Strains on Middle and Lower Classes, Advocates Argue
Article:
In a late-night meeting on Friday (Dec 27), former Indonesian Minister of Religious Affairs Lukman Hakim Saifuddin and members of the Gerakan Nurani Bangsa (GNB) movement urged Finance Minister Sri Mulyani to reconsider the planned 12% VAT increase, set to take effect in 2025. The plea comes amidst growing public resistance to the tax hike, with over 197,753 signatures on an online petition opposing it.
Lukman, who is also a GNB board member, expressed grave concerns about the potential impact of the VAT increase on the middle and lower classes, particularly those still reeling from the economic repercussions of the COVID-19 pandemic. "The middle class is already struggling. We’re seeing job losses, wage cuts, and rising prices of essential goods," he said at a GNB virtual press conference on Saturday (Dec 28).
The former minister argued that the VAT hike would only exacerbate their financial hardships, not only directly by reducing their spending power but also indirectly by negatively impacting the consumption-driven economy, a key driver of Indonesia’s GDP. GNB also drew attention to other potential socioeconomic burdens, such as increases in BPJS healthcare contributions and the Tabungan Perumahan Rakyat (Tapera) program.
Lukman implored Minister Sri Mulyani to reassess recent fiscal policies and advocated for a more equitable approach, especially for the lower and middle classes. "The government should formulate policies that favor the middle and lower classes. It’s a matter of fairness and long-term economic stability," he said.
The planned VAT increase is a consequence of Law No. 7/2021 on the Harmonization of Tax Laws, enacted under the previous administration led by President Joko Widodo. Despite the transition of power, the current government under President Prabowo Subianto is facing growing public dissent over the unpopular tax hike.
