Celios: 12% PPN Increase Potentially Triggers Wave of Layoffs

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Adi Ahdiat 03/12/2024 14:00 WIB

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The Indonesian government plans to increase the Value Added Tax (VAT) rate from 11% to 12% starting in 2025. However, Celios assesses this could potentially trigger a wave of layoffs.

Estimated Decrease/Increase in Labor Absorption Based on VAT Rate (November 2024)

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Celios: 12% PPN Increase Potentially Triggers Wave of Layoffs

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Estimated Decrease/Increase in Labor Absorption Based on VAT Rate (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 trigger a wave of layoffs.

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

According to Celios' calculations, implementing a 12% VAT rate could reduce the national surplus of businesses, potentially leading to layoffs affecting approximately 554,000 workers.

"Businesses in the retail, manufacturing, logistics, and recreation sectors will respond to the impact of reduced turnover and increased operating costs by reducing their workforce," Celios stated in its report.

"This indicates that the VAT rate increase has the potential to cause job losses or unemployment," it continued.

Conversely, job absorption could potentially increase if the VAT rate were lowered.

Celios estimates that if the VAT rate were reduced from 11% to 10%, job absorption could increase by approximately 554,000 people.

Furthermore, if the VAT rate were lowered to 8%, job absorption could significantly increase, reaching up to 1.17 million people.

"The sharp decline in job absorption and other economic indicators [due to the 12% VAT] underscores the importance of policy evaluation and a precautionary principle before implementing higher tax rates," Celios stated.

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: 12% PPN Increase Potentially Triggers Wave of Layoffs

Celios: 12% PPN Increase Potentially Triggers Wave of Layoffs

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Celios: 12% PPN Increase Potentially Triggers Wave of Layoffs

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