Indonesia to raise VAT for most goods and services, not just luxury items

Indonesia on Dec 16 decided to go ahead with a wideranging increase in the value-added tax (VAT) to 12 per cent in 2025, reversing a plan to apply the hike only to luxury goods, but will introduce measures to soften the blow for lower-income earners.

By law, the VAT is scheduled to increase by 1 percentage point to 12 per cent from Jan 1, but there has been growing public pressure to delay it, prompting lawmakers to propose a selective VAT hike.

Finance Minister Sri Mulyani Indrawati said that as part of the increase, VAT will be charged for the first time on premium-quality food and services, including international schools and high-end hospitals.