As reported by Tempo.co, in an apparent capitulation to widespread public discontent, President Prabowo has backtracked, to some degree, on plans to implement a 12% Value-Added-Tax (VAT) effective January 01, 2024.
Confronted by claims from many sectors that the 12% VAT would weaken the Indonesian economy, President Prabowo Subianto now insists that the 12% tax will apply only to luxury goods, with essential commodities required to pay only 11% VAT.
President Probowo said the decision to apply the VAT selectively will help protect lower-income Indonesians. “For other citizens, we will continue to protect them; the government has not imposed what should have been collected since the end of 2023,” the President said on Friday evening, December 06, 2024.
Confusion
The Ministry of Finance has yet to confirm precisely what items will be classified as luxurious and, therefore, subject to the 12 percent VAT. The Head of the Budget Policy Center for State Revenue and Expenditure (APBN) BKF, Wahyu Utomo, said the final list of taxable items was “still under discussion.”
A Comparison
Tempo.com has also published an eye-opening comparison of VAT rates across various ASEAN countries. This information was published by Taxsummaries.pwc website.
So, how do VAT or Value-Added Taxes in neighboring ASEAN countries compare? Is Indonesia’s VAT the highest?
According to the Taxsummaries.pwc website, the following comparative VAT levels across ASEAN disclosed the highest rate of 12% in the Philippines and Indonesia.
Philippines: 12 percent VAT rate.
Indonesia: 12 percent VAT rate.
Vietnam: 10 percent VAT rate.
Laos: 10 percent VAT rate.
Myanmar: 10 percent VAT rate.
Cambodia: 10 percent VAT rate.
Singapore: 7 percent VAT rate.
Thailand: 7 percent VAT rate.
Malaysia: 6 percent VAT rate.
Brunei Darussalam: No VAT rate or 0 percent.
Higher VAT rates are applied in India, where a Goods and Services Tax (GST) ranges between 5% and 28%, with a standard tax rate of 18% for most goods and services.
Meanwhile, in Europe, Hungary and Denmark apply a 25 % VAT. Wealthy States, like the United Arab Emirates and Brunei, charge no VAT. Closer to Bali, Timor Leste charges 2,5% VAT on imported items and O % on domestic goods. Indonesia’s neighbor of Australia imposes a 10% GST on goods and services.
Related Links
RI Chamber of Commerce Wants VAT Postponed
12% VAT – A Threat to Bali Tourism?
Indonesia Can’t Wait to Impose 12% VAT Rate
VAT Rate to Increase to 11% on 01 April
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