Insight

Last Minute Tax Formula Changes, Good or Bad?

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Algo Research Team


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Key Summary:


  • Effective tax rate remains at 11%
  • Applicable only for non-luxury items
  • Good, but makes future policy uncertain

After much criticism from citizens, the government of Indonesia decided to tweak the VAT calculations for 2025 so that the effective rate remains at 11% except for luxurious items to 12%.


Context: On 31st December 2024, the Ministry of Finance released a last-minute tax regulation under PMK No.131/2024 to change the formula for its value added tax (VAT) policy.


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