In a press statement released here on Friday, he explained that the policy is not expected to affect the lower middle class so much because the 12-percent VAT will only apply to luxury and premium goods.
"The VAT increase from 11 to 12 percent is for the premium staple food ingredients," he said.
He added that the 12-percent VAT rate, which will be applied from January 2025, is a law mandate and the result of an agreement reached by the government and the House of Representatives (DPR) during the COVID-19 pandemic.
"There is an agreement to increase VAT from 10 percent to 12 percent gradually. That's why it was increased from 10 percent to 11 percent (in April 2022) first, and now, in accordance with the schedule, it will be increased to 12 percent as per January 1, 2025," Abdurrahman informed.
To reduce the impact of the VAT increase, the government has prepared various incentives, including for MSME players, such as the continuity of the MSME final income tax facility of 0.5 percent.
"If they have received the incentive for seven years and it will end in December, they will still get a one-year extension," he said.
Meanwhile, MSME players who have only used the tax facility for two or three years will be given an extension period of four to five years.
"So, it is clear that the 12-percent VAT policy will not impact the middle and lower class," Minister Abdurrahman said.
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Translator: Ahmad F, Kenzu
Editor: Arie Novarina
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