https://epajak.or.id/ Tips and Tricks for Smart Consumers Facing VAT Hikes , Value Added Tax (VAT) is back in the spotlight after the government announced an increase in its rate. This policy is part of the strategy to increase state revenue while supporting fiscal sustainability. However, for the general public, the VAT hike often translates as an increase in daily economic burden. This article will discuss the impact of the VAT hike and provide tips and tricks for smart consumers in dealing with this challenge.
What is VAT and Why is the Rate Increased?
VAT is an indirect tax levied on the consumption of goods and services. In Indonesia, VAT is applied to almost all transactions except those explicitly exempted by law, such as certain basic necessities, healthcare, and education. The increase in VAT rates usually aims to increase state revenue in order to fund the development of infrastructure, education, healthcare, and other sectors.
The VAT rate in Indonesia is gradually increasing from 10% to 11% in April 2022, with plans for further increases to 12% in the future. This move is part of the Harmonisation of Tax Regulations Act (HPP Act). While the intention is positive, the impact is immediately felt by consumers in the form of higher prices for goods and services.
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Impact of VAT Increase on Consumers
An increase in the VAT rate means that consumers will have to pay more for the goods and services they purchase. While the increase is only 1%, from 11% to 12%, it can lead to significant price increases on some products, especially luxury goods and services. According to the Ministry of Finance, the increase in the VAT rate to 12% is a mandate from Law Number 7 of 2021 on Harmonisation of Tax Regulations.
However, the government has emphasised that this VAT rate increase will only be imposed on luxury goods and services, such as private jets, yachts, and ultra-luxury homes. Goods and services for the basic needs of the community that have been given exemption facilities or subject to a 0% VAT rate will remain in effect, so it is expected not to burden the general public.
The increase in VAT has an impact on almost all sectors of life, including:
Increase in Goods and Services Prices. The prices of daily necessities, such as food, clothing, and transport, tend to increase due to the VAT rate adjustment. Although certain basic necessities are exempted from VAT, other supporting goods and services are still affected.
Decreased Purchasing Power. With the increase in prices, people’s purchasing power tends to decrease, especially for low-income groups.
Changes in Consumption Patterns. Consumers may start to reduce purchases of non-essential goods or look for more affordable alternatives.
Inflationary Effects. The VAT hike may trigger inflation if the prices of goods and services in general experience a significant increase.
Tips and Tricks for Dealing with VAT Hikes
While a VAT increase is inevitable, smart consumers can implement the following strategies to minimise its impact:
- Prioritise Essential Needs
Focus spending on needs that are truly essential, such as food, transport, and healthcare. Reduce purchases of luxury items or tertiary needs that are not urgent. - Take Advantage of Discounts and Promotions
Many stores and e-commerce platforms offer discounts or cashback that can help offset the price increase due to VAT. Utilise these promos wisely. - Shop Carefully
Compare prices across multiple stores before buying.
Consider buying in bulk if possible, especially for non-perishable items.
Take advantage of customer loyalty programmes to earn extra points or discounts.
Read also:
- How to File a Tax Objection According to PMK 118/2014
- Efficient Tax Basis: Utilisation of Other Value DPP in PMK 131/2024
- Smart Consumers Facing VAT Hikes
- KAP and KJS
- PNBP Reform at the Ministry of Law and Human Rights
- Reduce Consumption of Goods Subject to High VAT
Some goods and services are subject to VAT at a higher rate, such as luxury goods. Avoid or reduce the consumption of these items to save money. - Buy Local Substitute Goods
Imported goods are often more expensive due to additional tax and logistics costs. Choose local goods that are more affordable and of higher quality. - Learn Financial Management
Organise a tighter monthly budget. Separate spending for essentials, savings, and additional expenses. This helps ensure that price hikes do not disrupt your financial stability. - Utilise Technology
Use a money management app to track your spending and create a budget. Some apps also provide savings suggestions that can help you manage your finances better. - Support Green Products
Some tax policies incentivise green goods and services. By supporting these products, you not only save tax but also contribute to environmental sustainability. - Government’s Role in Reducing Consumer Burden
- In addition to individual efforts, the government’s role is crucial in managing the impact of the VAT increase. Some of the steps that can be taken include:
- Subsidising: For vulnerable groups, subsidising basic necessities can help maintain purchasing power.
- Price Monitoring: The government needs to ensure that businesses do not raise prices unreasonably beyond the impact of VAT.
- Public Education: Providing clear information about the VAT increase and how to deal with it helps people understand and adapt.
- Tax Incentives: Provide incentives for small businesses to ease their burden and maintain price stability in the market.
- The VAT hike is part of a dynamic fiscal policy that aims to support the country’s development. While it poses challenges for consumers, there are many ways to deal with it intelligently. By prioritising essential needs, taking advantage of promotions, and managing finances wisely, the impact of the VAT hike can be minimised.
- At the same time, synergy between consumers, businesses, and the government is necessary to create a stable and sustainable economic ecosystem. With the right approach, the VAT increase can be faced more optimistically without having to sacrifice people’s quality of life.