Insight

12% VAT in Indonesia Comes at a Bad Time

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Algo Research Team


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Key Summary:


  • Indonesia's 12% VAT is the highest in ASEAN
  • Additional IDR70-100tn revenue from VAT
  • Poor timing given slowdown in household spending

The Indonesian government plans to increase Value Added Tax (VAT) rate to 12% in 2025, despite an apparent slowdown in the economy, particularly in household consumption.


Backstory: As the 2024-2029 government aims to accelerate economic growth through various new programs, the Ministry of Finance (MoF) plans to partially fund them through a higher VAT.


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