Headline: The Mystery Behind Indonesia‘s PPN Hike: First Jokowi-Era Finance Minister Speaks Out
Article:
Jakarta, CNN Indonesia — The first Finance Minister of the Jokowi administration, Bambang Brodjonegoro, has shed light on the mystery and "hidden hands" behind the increase of Indonesia’s Value Added Tax (PPN) to 12 percent. In a revealing interview with CNBC Indonesia’s "Cuap Cuap Cuan" program, Brodjengo said a prominent businessman was involved in lobbying for the PPN hike in stages.
The story begins with a business lobby in 2015, when PPN was still at 10 percent, asking for a reduction in Corporate Income Tax (PPh) to match Singapore’s 17 percent rate, which was then at 25 percent. Brodjonegoro, who was the finance minister at the time, received this proposal.
"Indeed, when I was the minister, I received a suggestion from the business world to reduce PPh to align with Singapore’s rate," Brodjengo said on Friday (27/12), as quoted by detik.com. "The propose rationale was to boost investment in Indonesia."
However, Brodjengo enquired how the government would maintain its tax revenue if PPh was reduced. The unnamed businessman then proposed raising PPN rates incrementally instead. Brodjengo swiftly rejected the idea, stating it was unfair to burden all Indonesian consumers with a higher PPN while only benefiting wealthy corporations with lower PPh.
Several years later, the business lobby persisted, and their efforts culminated in the issuance of the Law on the Harmonization of Tax Regulations (UU HPP) in 2021. Last year, PPh was reduced to 22 percent, and PPN rose to 11 percent, set to increase again to 12 percent by 2025.
Brodjonegoro expresses disbelief that it took six years for the proposal to become law, despite knowing it would lead to higher PPN rates. He argues that Indonesia shouldn’t compete with Singapore on taxation, given their vast differences in geography and population.
"Singapore is just a small island with a small population. Their royal treatment isn’t our concern. We have a vast archipelago and a much larger population," Brodjonegoro added.
Under the current Prabowo administration, PPN will indeed increase to 12 percent on January 1, 2023, due to the aforementioned law passed during Jokowi’s tenure. A petition titled "Government, Immediately Revoke PPN Hike!" has been circulating online, amassing over 193,000 signatures as of Wednesday (25/12).
(agt/agt)
