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November 27, 2024 | 04:23 pm
TEMPO.CO, Jakarta - An Indonesian economist from Segara Institute, Piter Abdullah, assessed that the increase of Value Added Tax (VAT) from 11 percent to 12 percent is feared to further impact the middle class. According to Piter, there will be a multiplier effect from the implementation of 12 percent VAT.
"If we insist on the VAT hike, it will increase burdens because prices will definitely rise," said Piter when contacted on Thursday, November 21, 2024. "Prices rise when people experience a decrease in purchasing power, which will result in a double hit. This is like falling down the stairs and getting hit."
He mentioned that currently there is no government regulation facilitating the lives of the middle class. On the contrary, the middle class is burdened with various taxes seemingly endlessly. So, how much is the income range of the middle class and what are its characteristics?
As quoted from Antara, the middle class group in Indonesia includes people with expenditure ranging from Rp2,040,262 to Rp9,909,844 per capita per month in 2024. The amount is determined by the World Bank standard regarding the middle class with calculations of 3.5-17 times the poverty line of a country.
Despite having modest incomes, the middle class plays a crucial role in strengthening a country's economy, including in Indonesia. This group also contributes to driving the economy, both through consumer spending and tax payments.
However, looking at the median value from the sequence of expenditure data published by the Central Statistics Agency (BPS), the middle-class median value stands at Rp2,846,440 per capita per month. This means that the median expenditure of the middle-class population tends to be closer to the lower boundary of the grouping.
Based on BPS data, the number of middle-class population continues to decline. In 2019, this group accounted for 21.45 percent of Indonesia's total population. This year, the number has dropped to 17.44 percent or around 47.85 million. They are downgraded to the candidate middle class or aspiring middle class group.
As reported on Investopedia.com, the middle class emerges as a dominant group worldwide, especially in developed countries and Southeast Asian regions, including Indonesia. The characteristics of someone classified as middle class are as follows.
1. Having a Home
Owning a home is often seen as a sign of stability and economic achievement for many people, including in Indonesia. In the United States, for example, owning a home remains a dream for many people, even though home prices can vary widely depending on the location.
2. Private Vehicle
In many countries, including Indonesia, owning a car is a sign that a person has achieved a better economic status. The type and price of the car owned can also be an indicator of social status.
3. Higher Education
Middle-class families usually prioritize higher education for their children. They strive to send their children to good universities or colleges, even though the cost of education can be very high.
4. Retirement Plan
Preparing for retirement is a top priority for many middle-class families. They make efforts to save and invest to ensure that they can enjoy a comfortable retirement.
5. Access to Healthcare Services
Health is a top priority for the middle class, and access to quality healthcare services is an essential need. The rising costs of medical care and medications make health insurance increasingly essential for them.
6. Family Holidays
Family vacations are a basic need for the middle class. Vacation shows that a family has the income to spend and is successful enough to take time off from work to focus on leisure time.
Editor's Choice: Economists Say 12% VAT Implementation Will Burden Indonesian Middle Class Even More
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