Indonesia’s VAT Increase Announcement
JAKARTA (Reuters) – Indonesia’s President Prabowo Subianto announced a planned increase in the value-added tax (VAT) rate by one percentage point to 12%, effective Wednesday, Jan. 1.
Prabowo clarified that this increase will only apply to luxury goods and services, aiming to end speculation about the affected items.
This decision reverses a prior announcement by finance ministry officials made in December, which suggested that the VAT hike would apply broadly, except for cooking oil sold under a government program, sugar for industry, and wheat flour—all of which would still be subject to an 11% VAT rate.
“Today, the government has decided that the increase of VAT rate from 11% to 12% will apply only to luxury goods and services that are the subject of luxury sales tax and are consumed by those with higher income, such as private jets, yachts, and luxury homes,” Prabowo stated.
Additionally, the government plans to implement support measures worth 38.6 trillion rupiah ($2.40 billion) to mitigate the VAT hike’s impact, which include electricity discounts and other tax breaks.
($1 = 16,090.0000 rupiah)
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