VAT Increase will Repress Public Purchasing Power, BPKN Says



Mahinda Arkyasa

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  • TEMPO.CO, Jakarta - Chief of the National Consumer Protection Agency (BPKN-RI) Rizal E. Halim said that the plan to increase Value-Added Tax (VAT) can certainly put burden on the public's purchasing power.

    Because a VAT increase will directly impact prices of goods considering that all this time VAT has been imposed on customers. "The price of goods will continue to repress the public's purchasing power, which has been under pressure. A pseudo-inflation will occur," Rizal said in a video conference on Tuesday, May 11, 2021.

    The pseudo-inflation stated by Rizal is an inflation that occurred not because of the increase of demand, but the price of goods. Such condition, Rizal said, can put pressure on economic growth.

    According to Rizal, the plan to increase VAT will affect public consumption contribution taking into consideration that the Covid-19 pandemic has provide enough trouble for the public because of severance, and the under pressure businesses.

    "So the public today is facing a complexity of problems triggered by Covid-19, it affects economic issues," Rizal said.

    Therefore, Rizal asserted that the government must provide social economic protection to the public. "But we are aware that we are looking at sectoral policies that as if no coordination on the upper echelon," Rizal said.

    Previously, the Coordinating Minister for Economic Affairs Airlangga Hartarto said that the government's efforts in increasing VAT is still being discussed by the government.

    "This is also related to the discussion on law that was being proposed to the House of Representatives, which is the [Draft Bill on General Provisions and Precedure for Taxes]," Rizal said on Wednesday, May 5, 2021.

    Pursuant to Law No, 42 of 2009 concerning the Third Amendment of Law No. 8 of 1983 concerning VAT on Goods and Services and Luxurious Goods Tax, the govenment can amend the amount of collected tax. The Law regulates a minimum change of tariffs of five percent and a maximum of 15 percent. Currently, the VAT tariffs is 10 percent.