Indonesia to press ahead with VAT hike, minister says

INDONESIA will next week confirm it is hiking the value-added tax (VAT) rate to 12 per cent, the Coordinating Minister for Economic Affairs said late on Tuesday (Dec 3), despite huge public pressure to delay the rise to avoid hurting people’s spending power.

By law, the VAT hike to 12 per cent from 11 per cent currently is scheduled to be implemented in January.

“We will announce it next week,” Airlangga Hartarto told reporters.

Indonesian businesses and unions have called for the legislated increase in the VAT rate to be paused because the economic environment is deteriorating.

The government has said the VAT hike is needed to improve the structural health of the budget, and a state bank has said it will have only a small impact on growth.

Airlangga said the government will also announce fiscal stimulus that will support the country’s labour intensive industry, which has been hit by layoffs as global demand growth slows. REUTERS