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Viral Shopping Receives 12% PPN: Tax Chief Finally Speaks Up

by Chief Editor
written by Chief Editor

Headline:
President Prabowo Clarifies PPN Hike: Only Luxury Goods Affected, Retailers to Refund Overcharges

Article:

Retail shoppers should not be Concerned about the 12% Value Added Tax (PPN) increase as of January 1, 2025 – at least not for now. President Prabowo Subianto has made it clear that this new tax rate only applies to luxury goods, such as private jets and yachts. Meanwhile, retailers are scrambling to refund overcharges they’ve already collected.

The Directorate General of Tax at the Ministry of Finance (DJP) has confirmed that they’ve met with retail businesses to discuss the confusion surrounding the PPN hike. Director General Suryo Utomo acknowledged that retailers have already updated their systems to reflect the increased tax rate, but assured consumers that the excess taxes collected will be refunded.

"We’re working on setting up a system to refund the overcollected PPN 12% to consumers," Suryo stated at a Media Briefing in Jakarta on Thursday (2/1). "It’s the state’s duty to ensure these funds are returned to their rightful owners."

The DJP is aware that retail systems have been updated to charge the 12% tax rate, but they are in talks with businesses to facilitate a swift transition back to the original 11% rate for non-luxury items. The transition period is expected to take around three months, with retailers having until the end of April to adjust their systems.

During the transitional phase, it’s possible that some retailers may mistakenly continue charging the 12% tax rate. In such cases, consumers can expect a refund mechanism to be implemented to reimburse any overpaid taxes.

The DJP emphasizes its commitment to enforcing the 2021 Harmonization of Pertinent Laws on Taxation (UU HPP) regarding the PPN increase to 12% as of January 1, 2025. However, the government has decided not to raise the PPN rate for non-luxury items, requiring a new base tax value (DPP) to be set through a Minister of Finance Regulation (PMK).

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Cash Usage Set to Surge Again

by Chief Editor
written by Chief Editor

Java-Based QRIS Payments to See 12% Value Added Tax Increase in 2025

The Indonesian government has officially announced a rise in Value Added Tax (VAT) on Java-based Quick Response Code Indonesian Standard (QRIS) payments, effective January 1, 2025. This shift will impact transactions conducted using the country’s popular QR code standard.

Until now, VAT has primarily targeted certain sectors. However, this new policy introduces a 12% VAT on QRIS-based transactions, a change that has sparked conversation and concern among economists.

Professor Dr. Rahmat Setiawan, SE, MM, from the Faculty of Economics and Business at Airlangga University (FEB Unair), believes the increased VAT on QRIS transactions could lead consumers to revert to cash payments. "If QRIS transactions are subject to a 12% VAT, customers may opt for cash again. Why choose QRIS if it ultimately attracts a higher VAT?" he explained.

Prof. Setiawan condemns the government’s decision to impose a 12% VAT on QRIS transactions, stating that it contradicts their efforts to promote non-cash transactions. "The government encourages non-cash transactions to boost economic growth and combat money laundering," he pointed out, referring to the government’s and Bank Indonesia‘s joint campaign to increase non-cash transactions.

Moreover, the economist predicts that this VAT increase could impact daily necessities and potentially contribute to unemployment. "Items like deodorant, toothpaste, and soap aren’t just luxuries; they’re daily essentials, and now they’re subject to a 12% VAT," he stated. He also expressed concern that a decrease in consumption due to the increased VAT could lead to job losses.

Prof. Setiawan urges the government to reconsider or postpone the VAT hike, suggesting they could use their existing authority to cap the VAT at 11% without amending the law. "The government can lower or raise the VAT to a maximum of 15% without changing the law," he concluded.

jar/tjh

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Prabowo Urges Reversal of PPN Hike to 12%, Here’s How to Make It Happen

by Chief Editor
written by Chief Editor

** området

Widespread protest and a petition signed by nearly 200,000 people have been sparked by plans to increase Value Added Tax (VAT) to 12% starting in 2025. The move, stipulated in Law No. 7 of 2021, or the Law on Tax Organization Harmonization (HPP), has drawn fierce opposition from citizens who argue that it will disproportionately impact lower-income individuals and stifle economic recovery.

The Indonesian government, however, has stood firm, stating that the VAT increase is crucial for balancing the state budget and that several stimulus packages are in place to maintain household purchasing power temporarily. Nevertheless, demands to revoke the VAT increase remain loud and clear.

legal expert weighs in

Mhd Zakiul Fikri, the director of Hukum at the Center of Economic and Law Studies (Celios), believes that the government should swiftly reconsider the VAT hike due to the overwhelming backlash. He presents several scenarios that could alleviate the situation:

  1. Adjusting the VAT rate: As stipulated in the HPP Law, the VAT rate can be adjusted between 5% and 15%, providing a range of possibilities for review and reduction.

However, Zakiul notes that the current legal framework may cause confusion, as the criteria for determining the 5% to 15% range are ambiguous. Moreover, any changes would require joint implementation with the House of Representatives (DPR), which could prove to be a lengthy and complex process, given the approaching deadline of January 2025.

CALL FOR AN EMERGENCY REGULATION

Given these challenges, Zakiul proposes that President Prabowo Subianto initiate an emergency regulation, or Peraturan Pemerintah Pengganti Undang-Undang (Perppu), to circumvent the impending VAT increase. He argues that Perppu has been employed in the past, including by President Joko Widodo (Jokowi) in 2017, to address urgent fiscal matters.

A RARE SHOW OF UNITY

Unusually, Zakiul’s recommendation aligns with that of Hadi Poernomo, a former director-general of taxation at the Ministry of Finance and former chairman of the Supreme Audit Agency (BPK). Hadi also urges the government to revoke the VAT increase, citing its potential impact on low-income households and small businesses. He suggests that the VAT rate could be reverted to 10% through another decree.

The backdrop to this debate is a looming budget crisis. According to the 2025 State Revenue and Expenditure Budget, the government’s reliance on VAT for revenue has surged to 43.2%, raising concerns about the potential consequences of lowering the VAT rate.

Alash, the inevitable?

As the clock ticks down towards January 2025, the debate over the VAT increase continues to intensify. With the DPR currently in recess until mid-January, the focus turns to the government and President Prabowo to address the potential economic fallout of this contentious fiscal policy.

(End/rrd)

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Improved Title: "Prabowo’s Alternative: Slash Tax in This Sector, Not Boost PPN"

by Chief Editor
written by Chief Editor

Headline: Indonesia‘s PPN Hike Sparks Opposition, Alternatives Proposed

Subhead: Government plans to increase Value Added Tax (PPN) to 12% in 2025, but critics argue there are more equitable revenue-raising strategies.

Indonesia’s government is considering a boost in Value Added Tax (PPN) from 11% to 12% starting 2025, as per the latest Harmonization of Tax Regulations Law (1/2021). The Ministry of Finance projects an additional Rp 75 trillion in state revenue. However, the proposed hike has sparked controversy, with concerns ranging from increased consumer prices to decreased purchasing power.

Proponents argue that the PPN increase could bolster state coffers, but critics contend that the government could explore more progressive tax strategies. According to a Center for Economic and Legal Studies (Celios) report, there are alternative revenue-raising measures that could be more equitable.

Celios suggests taxing the wealthy by targeting their substantial assets in Indonesia. This approach could potentially generate Rp 81.6 trillion in revenue for the country. Additionally, the government can consider imposing a carbon tax, an idea that has been on the table for years. If implemented effectively, this could bring in up to Rp 69 trillion.

The government can also tap into windfall profits from commodities like coal, which could potentially yield Rp 47 trillion. Progressively reforming corporate income tax and closing tax loopholes in the digital and palm oil sectors could also help maximize revenue.

"These measures are not only more equitable but also less likely to strain lower-income families," the Celios report argues.

Celios’s legal director, Mhd Zakiul Fikri, suggested that President Prabowo Subianto could reconsider the PPN hike and explore these alternatives. He pointed out that previous governments had used Presidential Regulations in Lieu of Laws (Perppu) to make regulatory changes.

Meanwhile, the move to increase PPN has generated widespread public debate, with concerns around burdening consumers and reducing purchasing power. The government maintains that it is committed to treasury expansion, but critics contend that alternative revenue-raising strategies are available and more forthcoming.

Keywords used for SEO: Indonesia, PPN, Value Added Tax, tax hike, tax revenue, tax alternatives, equitable taxation, Celios, Mhd Zakiul Fikri, presidential regulations

Internal linking opportunities: Previous articles on Indonesia’s tax policy, Celios and its reports, President Prabowo Subianto

External linking opportunities: Government official statements, Celios reports, relevant news outlets covering the topic

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Reveling the Positive Impacts of VAT Hike: What are They?

by Chief Editor
written by Chief Editor

Title: Indonesia‘s PPN Hike to 12% in 2025: The Projected Positive Impacts

Article:

Assistant Editor – December 26, 2024

Jakarta, Indonesia – The Indonesian Ministry of Finance (Kemenkeu) has outlined a series of positive impacts expected from the increase of Value Added Tax (PPN) from 11% to 12%, set to take effect on January 1, 2025. This tax hike aligns with the provisions of Law Number 7 of 2021, which harmonizes tax regulations and exempts essential daily goods and services from the increase.

Projected Positive Impacts

Analysts anticipate that the PPN hike will have a positive influence on four key sectors. These include:

  1. Job Creation: Following the PPN increase from 10% to 11% in 2022, the PPN 12% is projected to boost employment. Between 2015 and 2019, an average of 2.4 million jobs were created annually, representing a 2.0% increase. This figure jumped to 3.2% (or 4.2 million jobs) when PPN was increased to 11% in 2022. Post-2022, jobs growth averaged 3.4% (or 4.7 million jobs) per year.

  2. Formal Employment Growth: The PPN hike is also expected to drive formal employment growth. From 2015 to 2019, average annual growth was 3.8% (or 1.9 million jobs). In 2022, this figure increased to 3.6% (or 1.9 million jobs). Post-2022, the growth rate jumped to 6.4% (or 3.6 million jobs) per year.

  3. Personal Income Tax (PPh 21) Collection: The PPh 21 is projected to increase by 19.35% annually, following the PPN hike. From 2015 to 2019, the average annual increase was 7.2% (or IDR 8.5 trillion). In 2022, this increased to 16.3% (or IDR 24.5 trillion). Post-2022, the PPh 21 is expected to grow by 19.35% per year.

  4. Inflation Control: Despite the PPN increase, the ministry assures that inflation will be kept in check. Between 2015 and 2019, average annual inflation stood at 3.17%. Although it climbed to 5.51% in 2022 post-PPN hike, it is projected to decrease to 2.08% per year afterwards.

Mitigating Measures

Coordinating Minister for Economic Affairs Airlangga Hartarto has expressed optimism about maintaining purchasing power despite the PPN increase. He announced that the government will introduce various stimulus packages in 2025, including:

  • 50% discount on electricity tariffs from January to February
  • Property purchase tax exemption up to IDR 2 billion
  • Full government subsidy for electric motorcycles
  • 3% reduction in luxury goods sales tax (PPnBM) for electric cars
  • 0% PPN for the transportation sector
  • PPN exemption for essential commodities
  • A detailed list of luxury goods to be taxed at 12% PPN to be issued before January 1, 2025

Stay tuned for more updates on Indonesia’s economic developments.

(Source: Kementerian Keuangan Indonesia)

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PDIP’s PPN 12% Initiative: Don’t Hide Fists While Slinging Stones!

by Chief Editor
written by Chief Editor

Gerindra Blames PDIP for 12% VAT Hike, PDIP Retaliates

Jakarta – Andre Rosiade, Deputy Chairman of the Gerindra Faction in the House of Representatives (DPR), has weighed in on the issue of the VAT increase to 12%, pinning the blame on the PDIP party.

"Now it seems like PDIP is throwing stones and hiding their hands about the 12% VAT hike, then attacking the Prabowo administration, when in fact, this was their initiative last year. So, PDIP shouldn’t play the victim," Andre told reporters Monday night (22/12/2024).

Andre stated that the Prabowo administration is now faced with implementing the Law Number 7 of 2021 on the Harmonization of Tax Regulations (HPP), which is the basis for the VAT hike. The administration, he asserted, cannot immediately cut the VAT rate because the State Budget for the 2025 fiscal year has already been agreed upon by the government and the DPR period 2019-2024.

The administration, Andre continued, is attempting to enforce the Law while considering the current difficulties faced by the public. According to him, the Prabowo administration is mitigating the Law’s implementation by applying the 12% VAT only to luxury goods, while essential goods remain at the 11% VAT rate.

"Now PDIP, especially Dolfie as the Chair of the HPP Law Drafting Team, shouldn’t provoke the public. Dolfie, you’re the driving force behind the 12% VAT hike," Andre added.

PDIP’s Response

Dolfie Othniel Frederic Palit, Deputy Chairman of the XI Commission of the DPR RI, responded to Gerindra’s accusations blaming PDIP for the approval of the Law Number 7 of 2021 on the Harmonization of Tax Regulations (HPP), which led to the 12% VAT increase. Dolfie explained that the HPP Law was originally an initiative of the government under President Joko Widodo (Jokowi).

"The HPP Law is an initiative of the Jokowi administration, submitted to the DPR on May 5, 2021. At that time, all factions agreed to deliberate on the government’s proposal for the HPP Draft Law," Dolfie said.

Dolfie added that at the time, eight DPR factions, excluding PKS, approved the HPP Draft Law, which was finalized on October 7, 2021. The HPP Law, in the form of an Omnibus Law, amended several provisions of the KUP Law, PPh Law, PPN Law, and Cukai Law, and also established the Voluntary Taxpayer Reporting Program and Carbon Tax.

The government, Dolfie explained, has the authority to propose an increase or decrease in the VAT rate, with a range of 5 to 12 percent. If the Prabowo administration plans to maintain the 12% VAT rate, it must also focus on improving economic performance, creating jobs, and enhancing public services.

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