Tempo is reporting that an economist from Segara Institute, Piter Abdullah, has assessed that the proposed Value Added Tax (VAT) hike from 11 percent to 12 percent is likely to burden Indonesia’s middle class , saying that currently, there is no government regulation easing the life of the middle class. On the contrary, the middle class is being burdened with various taxes that seem endless.
He noted that the middle-income group has not received any social assistance to date, but is being burdened with tax hikes. Therefore, Piter argued that the purchasing power of the middle class, which is currently on the decline, might plummet even further.
According to Piter, there will be a multiplier effect from the implementation of 12 percent VAT. Moreover, Indonesia is currently facing the phenomenon of decreasing purchasing power, reduced job opportunities, lay-offs, and stagnant economic growth, says Tempo.
“If we force the VAT hike, it will increase the burden because prices will definitely rise,” said Piter when contacted on Thursday (21/11/24.) “Prices will rise when the public experiences a decline in purchasing power, thus resulting in a double hit.”
Meanwhile, the Director of Center of Economic and Law Studies, Bhima Yudhistira, said that aside from the VAT increase, the public will also face nine new levies in 2025.
Those nine levies are a 0.5 percent tax for MSMEs and mandatory vehicle insurance (third party liabilities). Then there are contributions to the People’s Housing Savings (Tapera) and discussions on Mandatory Pension Funds.
There is also a plan to adjust commuter train ticket prices based on the National ID Card number. Furthermore, the removal of Fuel Subsidies (BBM) will be replaced with Direct Cash Assistance (BLT). There is also a possibility of an increase in Single Tuition Fee (UKT) for students and Health Insurance (BPJS) contributions. Lastly, there will be the implementation of sweetened beverage excise tax, according to reporting from Tempo.
Source: Tempo
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