TEMPO.CO, Jakarta - The Taxation Directorate General of the Finance Ministry ensured that the government’s plan to levy Value Added Tax (VAT) on education will only apply to certain education services. The Tax DG is determined to make the tax incentives policy be more targeted.

“VAT on education service will only apply to elite schools. Educational services for the general public will be exempt from VAT,” as quoted from the announcement of the Taxation Directorate General on its Instagram @ditjenpajakri on Thursday, June 17, 2021.

In 2021, the government allocated Rp550 trillion for the education sector. Thus far, the budget has been used for facilities of all kinds of education, including elite ones. “So high-cost tutoring service and free education are not subject to VAT.”

The provision of tax incentive which is considered not right on target does not only occur in the education service. In the staple food sector, both premium rice and regular rice are also exempt from the tax.

Another example is imported premium beef Wagyu that is not subject to tax as local beef. While in fact, consumers of the two goods have far different purchasing power yet both receive the same tax incentives.

“People are able to pay [tax] but they do not because they consume goods or services that are not subject to VAT,” the Taxation DG wrote.

The government through the Finance Ministry thus prepared a revision of the law on general tax provisions and procedures (RUU KUP) which will stipulate a reform in the VAT system. The system is expected to create justice by reducing distortions and eliminating ineffective facilities in order to increase tax compliance and optimize state revenues.

Read: VAT Increase will Repress Public Purchasing Power, BPKN Says

M JULNIS FIRMANSYAH