Business uproar mounts as Indonesia pushes VAT hike amid sluggish demand

[JAKARTA] Indonesia’s plan to hike its value-added tax (VAT) to 12 per cent, from 11 per cent, starting on Jan 1 has triggered a wave of backlash from consumers and businesses, intensifying fears of weakened spending and economic instability, while placing the country alongside the Philippines as having the highest VAT rate in South-east Asia.

As the clock ticks down, the looming tax hike in South-east Asia’s largest economy is deepening the uncertainty surrounding Indonesia’s economic outlook, posing a significant challenge to President Prabowo Subianto’s ambitious economic agenda.

Several business groups have intensified their lobbying efforts, urging the government and parliament to postpone the hike, warning that the policy could erode consumer purchasing power already strained by rising costs.