Minister Ensures VAT Increase Policy Wil Not Affec MSMEs

Jakarta, VIVA – The Minister of Cooperatives and Small and Medium Enterprises, Maman Abdurrahman, believes that the government’s policy on adjusting the Value Added Tax (VAT) to 12 percent will not impact the performance of MSMEs.

According to Minister Abdurachman, this step is part of a long process that began during the Covid-19 era when the government faced the dual challenge of securing the real economy while maintaining the country’s financial stability.

“At that time, we were faced with two critical situations: how to safeguard employees in the formal sector at risk of layoffs, and how to protect the grassroots economy,” the minister said on Saturday (Dec 21).

To balance the situation, the government decided to temporarily lower corporate taxes to ease the burden on companies, especially those in sectors affected by Covid-19, while increasing VAT as compensation.

The minister emphasized that although VAT has been raised, the policy will not affect MSMEs or lower-middle-income communities.

“We ensure that only luxury and premium goods are impacted by this increase,” Minister Abdurrahman remarked.

“The 12 percent VAT increase only applies to premium food items like wagyu beef, which are clearly not part of our daily consumption. This will not affect the consumption of lower-middle-income groups or small and medium enterprises that deal with staple goods,” he added.

As part of its support for the MSME sector, the government has launched several tax incentives specifically designed to assist small business owners.

One is the extension of the 0.5 percent final income tax incentive for seven years, provided to MSME entrepreneurs with an annual turnover of up to IDR 4.8 billion.

This incentive is aimed at helping micro and small enterprises withstand the unavoidable economic impact of fiscal policy changes.

Responding to public opposition regarding the 12 percent VAT increase, minister Abdurrahman clarified that the government has prepared an incentive package worth IDR 265 trillion to mitigate its effects.

“We have allocated almost 95 percent of this budget to protect lower-middle-income groups and MSMEs. We also expect strict oversight to ensure the VAT increase does not affect the prices of staple goods,” he stated.

The minister further emphasized that the VAT increase is not an effort to reduce incentives for MSMEs. The government remains committed to ensuring that MSMEs and the public are not negatively impacted by the increase.

“Our ministry will continue working to ensure that the policies implemented truly benefit all groups, especially the most vulnerable,” he explained.

With the 12 percent VAT policy, Minister Abdurachman affirmed that the government seeks to balance national economic recovery with protecting vulnerable communities.

This step is expected to prevent undue burdens on lower-income groups and MSMEs while maintaining the country’s economic stability.

Through open dialogue and transparency, the minister hopes to alleviate public concerns and ensure that government policies are well-implemented, providing tangible benefits for the Indonesian people.