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November 22, 2024 | 05:47 am
TEMPO.CO, Jakarta - The president of the Indonesian Trade Union Confederation (KSPI), Said Iqbal, considers that increasing the value-added tax or VAT to 12 percent will worsen the economic conditions of workers and small communities. On the other hand, he said that increasing the minimum wage of only 1-3 percent is not enough to cover people's basic needs.
"As a result, people's purchasing power declines, and its impact spreads to various economic sectors," Said said in his official statement on Thursday, November 21, 2024.
KSPI and the Labor Party recommend four things to the government in response to the VAT increase. The first point asks the government to raise the minimum wage in 2025 by 8-10 percent to increase people's purchasing power. Regulators are also urged to set sectoral minimum wages according to each sector's needs.
The third request, Said said, involves canceling the VAT increase. The fourth request is to increase the tax ratio without burdening the small population. "But by expanding the number of taxpayers and increasing tax collection on large corporations and wealthy individuals," he said.
If the government insists on raising the VAT to 12 percent and does not increase the minimum wage as demanded, KSPI and other labor unions warn that they will hold a national strike. The strike is claimed to involve 5 million workers throughout Indonesia. Workers will not participate in production activities for at least 2 days. This plan will be carried out before December 24.
According to Said, the VAT increase could make it more difficult for the government to achieve the 8 percent economic growth target. The sluggish purchasing power, he said, will also worsen market conditions and threaten business continuity.
He added that this policy not only weakens purchasing power but also has the potential to increase social disparities. With the increasing VAT burden, Said said, the small population has to allocate more money for taxes without adequate income increases.
"The unequal income distribution will widen the gap between the rich and the poor, making the burden on the small population heavier," said the President of the Labor Party.
HAMMAM IZZUDDIN | YOHANES PASKALIS
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