Jakarta – Indonesian President Prabowo Subianto emphasized that the 12% Value-Added Tax (VAT) will only apply to luxury goods and services consumed by the affluent. He stated that this policy reflects the government’s commitment to prioritizing the needs of the people.

This was conveyed during a press conference following the Annual Financial Closing Meeting with the Minister of Finance at the Mezzanine Hall of the Ministry of Finance building on Tuesday (December 31).

“This means that for goods and services not classified as luxury items, there will be no increase in VAT rates, which remain at the current 11% rate that has been in effect since 2022,” Prabowo explained.

Prabowo clarified that the 12% VAT will only apply to items already subject to Luxury Goods Sales Tax (PPnBM).

“These are goods consumed by wealthy individuals, such as private jets, luxury yachts, and high-end homes valued far above the middle-class range,” he elaborated.

He also emphasized that basic necessities and essential services that have been exempted from tax—maintaining a 0% VAT rate—will continue to be tax-free.

“For essential goods and services needed by the majority of the population, the VAT exemption remains in place. This includes staples such as rice, meat, fish, eggs, vegetables, fresh milk, as well as education services, healthcare services, public transportation, affordable housing, and drinking water,” Prabowo said.

Prabowo underscored that this policy reflects the government’s dedication to creating a fair and pro-people taxation system.

“The government will continue its efforts to establish a taxation system that is both fair and pro-people,” he remarked.

Prabowo further reaffirmed the government’s commitment to supporting the people through a stimulus package totaling Rp 38.6 trillion. This package includes provisions such as 10 kilograms of rice per month for 16 million food assistance recipients, a 50% discount on electricity bills for customers with a maximum capacity of 2200 volts, and funding for labor-intensive industries.

“Incentives include income tax (PPh Article 21) relief for workers earning up to Rp 10 million per month, exemption from income tax for small and medium enterprises (SMEs) with an annual turnover of less than Rp 500 million, and other measures. Altogether, this package amounts to Rp 38.6 trillion,” Prabowo stated. (RR)