Indonesia's New VAT Policy

In a significant move to stimulate economic growth, Indonesia has announced a 12% Value Added Tax (VAT) on luxury goods. This policy, effective from January 2025, targets items such as private jets, luxury yachts, cruise ships, and high-end homes, while keeping essential goods and services VAT-free.

Impact on Daily Life

The government assures that the VAT hike will have minimal impact on the general public's daily lives, as basic necessities like rice, meat, fish, eggs, vegetables, fresh milk, and essential services including education, healthcare, public transport, and basic housing remain exempt from VAT.

Government Measures to Alleviate Burden

To mitigate the effects of the VAT increase, the Indonesian Government has introduced several relief measures. These include rice assistance for poor households, a 50% reduction in electricity bills for many families, and partial VAT exemptions for electric vehicles, hybrid cars, and housing purchases. These initiatives are set to roll out in January and February 2025.

Economic Stimulus Package

Indonesian President Prabowo Subianto, in an online press conference on December 31, highlighted the country's commitment to implementing an economic stimulus package. This package aims to ensure that the VAT increase does not significantly affect the public's purchasing power, focusing on sectors like manufacturing, trade, digital industries, and the informal economy.