Indonesia’s President Prabowo Subianto has approved a plan on 6 December 2024 to increase the value-added tax on luxury goods by one percentage point to 12% in 2025, according to Sufmi Dasco Ahmad, the deputy speaker of parliament.
Starting 1 January 2025, VAT on luxury goods will increase from 11% to 12%, while other goods, including some staples, will remain at 11%.
Indonesia’s parliament has proposed higher VAT on items similar to those taxed as luxury goods, like houses and cars.
“In this current economic situation, we all know that we could not impose the new rate to all goods, so we find the middle-ground solution with the government,” Sufmi Dasco Ahmad, deputy speaker of parliament, said.
The VAT hike aims to strengthen the budget’s structural health with a fiscal stimulus planned alongside the new VAT rate.
This follows after Prabowo pledged to raise tax revenue from 10% to 18% of GDP, adding an additional USD 100 billion to the country’s budget.
