Entrepreneurs Ask To Postpone The 12% VAT Increase

Tuesday, 19 Nov 2024

By putri@insightinnews.com Business leaders are urging the government to carefully consider various factors when determining the minimum wage for the upcoming year. The impact of wage increases must be anticipated by business operators. Mahendra Rianto, the Chairman of the Indonesian Logistics Association (ALI), stated that the government should reduce or eliminate unnecessary costs that burden businesses in light of the anticipated wage hikes next year. "The government's responsibility is to eliminate costs that impose a burden on businesses for non-essential matters, such as illegal levies throughout the supply chain and logistics," he remarked on Tuesday (November 12). Additionally, ALI is requesting the government to postpone the increase of the Value Added Tax (VAT) from 11% to 12% in 2025, as it would affect the purchasing power of the public. "Postpone the VAT increase to 12%," he emphasized. For context, the rationale behind the VAT rate increase policy is outlined in Law Number 7 of 2021 concerning Harmonization and Tax Regulations (HPP), specifically Article 7 (1), which states that a VAT rate of 12 percent will take effect no later than January 1, 2025. From a regulatory perspective, as long as there are no provisions that annul this article, the government will implement the VAT rate increase policy. However, empirically, the government has the option to delay the enforcement of this regulation. Regarding the calculation of the minimum wage for 2025, Mahendra believes that the government must first complete discussions with labor unions and employers to establish an ideal wage. Only after this can the standard for the ideal wage be translated into each province, thereby creating a common ground and defining what constitutes an ideal wage. "Only then can we formulate the figures for discussion with both parties. Employers should have Key Performance Indicators (KPIs) for their employees' productivity, while employees should have KPIs related to their wages," Mahendra explained. He noted that in several well-managed private companies, implementing this approach allows for smooth adjustments to wages. Furthermore, Mahendra stated that the rate of wage increases will vary across different industries.

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