Prabowo Confirms 12 Percent VAT Hike Targets Only Luxury Items

Jakarta, VIVA – President Prabowo Subianto confirmed that the 12 percent value-added tax (VAT) increase, set to take effect on January 1, 2024, will only apply to luxury goods.

“It has been explained before. VAT is mandated by law, and we will implement it. However, it will be selective, only for luxury goods. For the general public, we will continue to provide protection,” the head of state said at the Presidential Palace on Friday (Dec 6).

Since late 2023, the government has refrained from collecting certain taxes that could burden the lower-income population.

“Even if the VAT increases, it will only apply to luxury goods, as part of our effort to defend and assist the less fortunate,” he added.

Earlier, President Prabowo met with leaders and members of the House of Representatives at the Presidential Palace in Jakarta on Thursday (Dec 5).

During the meeting, the house of representatives discussed the planned VAT increase to 12 percent, which is set to begin on January 1, 2025.

Deputy Speaker of the House of Representatives, Sufmi Dasco Ahmad, shared that three key points were addressed in the meeting, including the selective application of the 12 percet VAT increase to luxury goods only.

“For essential goods and services that directly impact the public, the current VAT rate of 11 percent will remain in effect,” Ahmad noted.

He also mentioned a proposal from House of Representatives members suggesting a reduction in taxes on basic necessities, which directly affect the population. President Prabowo stated that he would review the proposal.