Many Doubt 12% VAT Can Boost Economic Growth

The government plans to increase the value-added tax (VAT) from 11% to 12% in 2025, specifically for luxury goods.

However, many people doubt that this policy will have a positive impact on the Indonesian economy.

According to a Kompas Research and Development (Litbang Kompas) survey, a majority, or 51.7%, of respondents are not confident that economic growth will improve if the VAT rate is raised to 12%, even if state revenue increases.

Specifically, 47.2% of respondents felt uncertain, and 4.5% were very uncertain about this.

On the other hand, 45.5% of respondents believe that the implementation of a 12% VAT can boost economic growth. This comprises 42.6% who are certain and 2.9% who are very certain.

Litbang Kompas also found that the majority of respondents across all socioeconomic groups plan to cut back on spending, focusing on essential needs if the 12% VAT is implemented.

"Although considered a reasonable response, this step has the potential to threaten the overall economy," wrote the Litbang Kompas research team in its report on Saturday, December 14, 2024.

This survey involved 625 respondents from 38 provinces randomly selected from the Litbang Kompas panel, in proportion to the population of each province.

Data collection was conducted from December 2-5, 2024, through telephone interviews. The survey's margin of error is approximately 3.92%, with a 95% confidence level, under conditions of simple random sampling.