DIGIVESTASI - Tax Amnesty and 12% VAT Increase in 2025: Debates Over Tax Justice, The government has included revisions to the Tax Amnesty Law in the 2025 Priority National Legislation Program (Prolegnas). If implemented, this would mark the third wave of tax amnesty within a relatively short time frame.

However, the policy is drawing sharp criticism from economists, particularly since its rollout coincides with the planned increase in the Value-Added Tax (VAT) rate to 12% in 2025.

Tax Justice Debates

Wahyu Widodo, an economist at Diponegoro University, argues that while tax amnesty and the VAT hike are distinct policies, their interconnected social effects create an impression of inequity. "Both relate to taxation but affect income strata differently, which makes it feel unfair," Wahyu told CNBC Indonesia.

According to Wahyu, tax amnesty programs often provide opportunities for high-income taxpayers, such as conglomerates and ultra-high-net-worth individuals. During the implementation of the second tax amnesty in 2022, 11 conglomerates with wealth exceeding IDR 1 trillion reportedly benefited from the program.

In contrast, the VAT increase will impact all segments of society, including lower-income groups. Consequently, the perceived disparity has sparked heated discussions, especially on social media.

"This disparity becomes a major issue when the economically disadvantaged are burdened by higher VAT rates, while the wealthy benefit from tax forgiveness," Wahyu emphasized.

Impact of VAT Increase on Purchasing Power

Wahyu further noted that lower and middle-income households are already struggling due to reduced purchasing power, exacerbated by inflation. Household consumption, which contributes 53.08% to GDP, grew only by 4.91% in Q3 2024, according to data from the Central Bureau of Statistics (BPS). This is slightly lower than the 4.93% growth in Q2 2024 and equal to the 4.91% in Q1 2024.

The overall economic growth rate also declined, dropping from 5.11% in Q2 to 4.95% in Q3 2024. “The BPS data reflects a decline in household purchasing power,” said Telisa Aulia Falianty, a Professor of Monetary Economics at the University of Indonesia.

Telisa warned that raising VAT to 12% in 2025 could further weaken household consumption, which has long been a driving force behind economic growth.

"The government must exercise extreme caution with this policy, as it risks putting additional pressure on purchasing power," Telisa advised.

Tax Amnesty Wave III Proposed Suddenly

Misbakhun, Chair of the DPR's Commission XI, disclosed that the proposal to include revisions to the Tax Amnesty Law in the 2025 Prolegnas came unexpectedly. “Suddenly, the Legislative Body (Baleg) added it to the long list of Prolegnas,” he revealed in Jakarta on Tuesday (November 19, 2024).

He explained that Commission XI only learned of the proposal after being informed by their Baleg representatives during a meeting with the Financial Services Authority (OJK). Following this, Commission XI took the initiative to champion revisions to the Tax Amnesty Law, drawing from their experience with previous policy deliberations.

"As a partner of the Ministry of Finance overseeing the Directorate General of Taxes, Commission XI felt it more appropriate to lead this policy proposal for inclusion in the 2025 Prolegnas priority list," Misbakhun said.

Need for Tax Policy Harmonization

The controversies surrounding the third tax amnesty and the VAT hike underscore the need for the government to strike a balance in its tax policies. Considering the economic pressures on lower- and middle-income communities, the government is urged to ensure that its fiscal decisions do not exacerbate inequality.

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