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December 10, 2024 | 07:41 am
TEMPO.CO, Jakarta - Indonesian President Prabowo has decided that the 12 Percent Value-Added Tax (VAT) will still be applied on January 1, 2025. However, its implementation will be selective, specifically for luxury goods. Meanwhile, basic needs will still be subject to an 11 percent VAT.
He emphasized that the tax increase will be applied selectively, only for luxury goods to help protect the lower-income people. "For other citizens, we will continue to protect them, the government has not imposed what should have been collected since the end of 2023," he said at the Presidential Palace complex, on Friday evening, December 6, 2024.
Regarding the exemption of goods, it has been regulated in article 4a of Law number 42 of 2009 concerning Value-Added Tax on Goods and Services and Luxury Goods Sales Tax. With the new policy, more goods will be exempted from VAT.
The Ministry of Finance cannot confirm when the list of luxury goods subject to a 12 percent VAT will be released. The Head of the Fiscal Policy Agency (BKF) Febrio Kacaribu and Head of the Center for State Revenue and Expenditure Budget Policy (APBN) BKF Wahyu Utomo did not respond to Tempo's inquiries until this news was published. The Head of the Ministry of Finance's Communication and Information Service Bureau, Deni Surjantoro, said he could not comment on it yet.
So, how does VAT or Value-Added Tax in neighboring ASEAN countries compare? Is our VAT the highest?
According to Taxsummaries.pwc website, the Philippines also has a 12 percent VAT calculated based on the gross selling price of goods or properties sold, or the gross receipts from service sales.
The Philippines Customs Bureau determines the VAT based on volume or quantity. The Philippines' VAT basis is the acquisition cost plus excise tax (if any). However, the Philippines exempts certain services from VAT, including financial intermediary services, which are taxed at a percentage based on gross sales, receipts, or income.
Researcher from the Industry, Trade and Investment Center for Indef, Ahmad Heri Firdaus, mentioned the list of VAT rates in ASEAN countries as a comparison to the 12 percent VAT to be implemented in Indonesia. He listed these ASEAN countries based on the order of VAT rates from highest to lowest:
Philippines: 12 percent VAT rate.
Indonesia: 12 percent VAT rate.
Vietnam: 10 percent VAT rate.
Laos: 10 percent VAT rate.
Myanmar: 10 percent VAT rate.
Cambodia: 10 percent VAT rate.
Singapore: 7 percent VAT rate.
Thailand: 7 percent VAT rate.
Malaysia: 6 percent VAT rate.
Brunei Darussalam: No VAT rate or 0 percent.
Several countries tax far above Indonesia, such as India. The most populous country imposes a Goods and Services Tax (GST) between 5% and 28% depending on the category of goods and services provided, with a standard tax rate of 18% for most goods and services. Furthermore, for certain goods, compensation levies are imposed at different rates as stipulated by the government.
Some European countries like Hungary and Denmark apply a 25 percent VAT, while wealthy countries like the United Arab Emirates exempt taxes. Timor Leste only imposes a 2.5 percent tax on imported goods and 0 percent for domestic products.
Rachel Farahdiba Regar and Nabiila Azzahra contributed to this article.
Editor's Choice: Finance Ministry: Luxury Goods Subjected to 12 Percent VAT Still Under Discussion
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