- Indonesia plans to postpone the increase of value-added tax (VAT) to 12% originally set for January 1, 2025.
- National Economic Council chairperson Luhut Binsar Pandjaitan confirmed the postponement in Jakarta.
- The government intends to provide incentives to the middle class before implementing the VAT increase.
- The proposed incentive will be in the form of electricity subsidies rather than direct cash aid to ensure effectiveness and prevent misuse.
- The government will allocate a portion of the state budget (APBN) for the electricity incentive, with a distribution mechanism to be established soon.
- Finance Minister Sri Mulyani Indrawati previously stated that the VAT increase is mandated by the Tax Regulation Harmonization Law (UU HPP) enacted in 2021.
- The UU HPP includes the 12% VAT proposal, considering the basic needs and health conditions of the population during the COVID-19 pandemic.
- The government is committed to considering various sector conditions when formulating tax policies.
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Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.