If we evaluate the rise in VAT on its own, we hope that the impact will not be significant based on our calculation.Jakarta (ANTARA) - The increase in Value Added Tax (VAT) to 11 percent will have a minimal impact of 0.4 percent on inflation for the remainder of 2022, a tax compliance expert staff at the Finance Ministry has projected.
As a result, inflation will still be maintained this year since it matches the government's projection of 2–4 percent inflation year on year, Yon Arsal estimated.
"If we evaluate the rise in VAT on its own, we hope that the impact will not be significant based on our calculation," he noted during an online media briefing on Friday.
"It is still within the range of the state budget," he added.
In addition to the increase in VAT, inflation will also be affected by the rise in global commodity prices due to geopolitical tensions this year, he said.
The contribution of the VAT increase to inflation is estimated to not be significant because several basic goods that contribute to inflation, such as rice and vegetables, are not covered by the tax.
Arsal lauded entrepreneurs from the Indonesian Chamber of Commerce and Industry (Kadin) for planning not to burden customers with the increase in VAT.
Related news: Government officially increases VAT rate to 11 percent
As a precaution against the potential of even higher inflation, the government has prepared a National Economic Recovery (PEN) fund worth Rp414 trillion that can serve as a safety net for the poor.
"For the less fortunate, in addition to facilitation in the HPP (Taxation Regulation Harmonization) Law, we will also support their spending. Thus, we can balance the psychological impact of VAT," he explained.
Starting from Friday (April 1, 2022), the government has officially raised the VAT from 10 percent to 11 percent, in accordance with Law No. 7 of 2021 on HPP.
Related news: Ministry clarifies VAT imposition solely on premium basic necessities
Translator: Sanya Dinda S, Fadhli Ruhman
Editor: Rahmad Nasution
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