Celios: A 12% PPN Increase Adds to Household Expenses

Economics & Macro

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Adi Ahdiat 03/12/2024 13:26 WIB

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According to Celios research, the increase in VAT from 11% to 12% will increase household expenditure, particularly for the poor, near-poor, and middle-class groups.

Estimated Increase in Monthly Household Expenditure due to 12% VAT (November 2024)

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Estimated Increase in Monthly Household Expenditure due to 12% VAT (November 2024)

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The Indonesian government plans to increase the value-added tax (VAT) rate from 11% to 12% starting in 2025. However, this is expected to increase household expenses.

This projection was presented by the Center of Economic and Law Studies (Celios) in its report, *PPN 12%: A Heavy Blow to Gen Z's Wallets and Lower-Middle-Class Households* (November 2024).

According to Celios' calculations, with a 12% VAT, poor households could see their monthly expenses increase by approximately Rp101,000.

Next, expenses for vulnerable households would rise by Rp153,000 per month, and middle-class households by Rp354,000 per month.

"For poor households, whose spending is largely allocated to basic necessities, this additional cost could affect their ability to meet other needs, such as education and healthcare," Celios stated in its report.

Celios assesses that the increased spending due to the 12% VAT will reduce the purchasing power of poor, vulnerable, and middle-class households, and diminish their ability to save.

The VAT rate increase is also expected to trigger inflation, which would then worsen economic inequality between the rich and the poor.

"Wealthier groups, with significantly greater purchasing power, may only experience a minor impact from the VAT increase, while poor and vulnerable groups will feel a much greater impact," said Celios.

"In the long term, this could lead to greater public dissatisfaction, as people feel that the economic burden is not shared fairly. This deepening inequality could create social tension and worsen relationships between social classes in Indonesia," it continued.

Editor : Adi Ahdiat

"Disclosure: This is an AI-generated translation of the original article. We strive for accuracy, but please note that automated translations may contain errors or slight inconsistencies."

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Celios: A 12% PPN Increase Adds to Household Expenses

Celios: A 12% PPN Increase Adds to Household Expenses

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Celios: A 12% PPN Increase Adds to Household Expenses

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