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December 14, 2024 | 04:55 pm
TEMPO.CO, Jakarta - The Financial Services Authority (OJK) revealed the potential impact of increasing the value-added tax (VAT) to 12 percent on banking. OJK's Chief Executive of Banking Supervision Dian Ediana Rae, said that the policy could lead to an economic contraction.
According to Dian, it cannot be denied that increasing the VAT to 12 percent has the potential to affect people's purchasing power. Meanwhile, from the supply side, the policy is considered to gradually affect production costs and quality of goods. This is done by business actors to ensure that products and services remain attractive to buyers.
"This adjustment condition has the potential to create a temporary contraction in economic activity," she said during a press conference on Friday, December 13, 2024.
Such condition however, is not considered to have direct implications on debtors' payment abilities. Dian stated that FSA, together with other regulators, will monitor economic indicators to promote growth and economic stability.
The 12 percent VAT rate increase will take effect at the latest on January 1, 2025, as stipulated in Article 7 Paragraph (1) of the Harmonization of Tax Regulations Law Number 7 of 2021 (UU HPP). Meanwhile, the rate of 11 percent has been in effect since April 1, 2022.
President Prabowo Subianto announced that the 12 percent VAT rate will selectively apply only to luxury goods. This decision was made following Finance Minister Sri Mulyani's announcement to increase VAT rates, which garnered widespread criticism from the public, entrepreneurs, and economists.
Sri Mulyani then ensured that the 12 percent VAT rate would not apply to goods that are basic necessities for people. Further clarification on the 12 percent VAT will be announced by the government on Monday, December 16, 2024.
In terms of banking, credit still experienced double-digit growth at 10.92 percent year-on-year (yoy) as of October 2024. Dian noted that when VAT increased from 10 percent to 11 percent in 2022, bank credit could still grow by 10.38 percent yoy with a Non-Performing Loan (NPL) level at 2.19 percent.
NABILLA AZZAHRA
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