Celios: 12% PPN Can Reduce Business Surplus

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Adi Ahdiat 05/12/2024 18:52 WIB

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According to Celios research, raising the VAT rate from 11% to 12% could reduce the national business surplus, even leading to job cuts.

Estimated Decrease/Increase in National Business Surplus Based on VAT Rate (November 2024)

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Celios: 12% PPN Can Reduce Business Surplus

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Estimated Decrease/Increase in National Business Surplus 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 reduce business surplus.

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 Society* (November 2024).

According to Celios' calculations, implementing a 12% VAT rate could reduce the national business surplus by Rp41.41 trillion.

This decrease in surplus indicates additional pressure on the business sector due to increased costs from higher taxes.

"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.

"Some companies will postpone new recruitments, while others will conduct rationalization. The sharp decline in employment and other economic indicators underscores the importance of policy evaluation and a cautious approach before implementing higher tax rates," they added.

Conversely, Celios estimates that the business surplus could increase if taxes were lowered.

If the VAT rate were reduced from 11% to 10%, the national business surplus is projected to increase by Rp41.41 trillion.

Furthermore, if the VAT rate were lowered to 8%, the increase in surplus could reach Rp84.23 trillion.

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 Can Reduce Business Surplus

Celios: 12% PPN Can Reduce Business Surplus

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