Indonesia’s president says VAT hike applicable only to luxury goods

Indonesia’s President Prabowo Subianto announced on Tuesday that the country’s planned increase in value-added tax (VAT) to 12 per cent, effective January 1, will apply exclusively to luxury goods and services.

Prabowo’s statement aimed to end confusion over which items and services would be impacted by the VAT hike. The move also overturned a previous announcement by finance ministry officials in December, who had stated that the increase would apply broadly, with a few exceptions for essential items like government-subsidized cooking oil, industrial sugar, and wheat flour, which would remain at the current 11 per cent VAT rate.

“Today, the government has decided that the increase of VAT rate from 11 per cent to 12 per cent 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 explained.

The president also emphasised that the government would continue with plans to offer support measures to mitigate the effects of the VAT increase, including electricity discounts and tax relief, with a total value of 38.6 trillion rupiah ($2.4 billion).

Attribution: Reuters