2025 Tax Policy: Growing Pressure on Middle-Low Income Society
The government plans to increase the Value Added Tax (VAT) to 12 percent, effective January 1, 2025. This policy aligns with Law Number 7 of 2021 concerning Tax Regulation Harmonization.
The planned VAT increase has received significant criticism from the public. On platform X, people are actively using the hashtag #PajakMencekik to protest this policy.
The implementation of 12 percent VAT is part of the government’s efforts to increase state revenue. It is known that the government’s debt maturing in 2025 has reached Rp 800.33 trillion.
If this policy is implemented next year, the burden on society, especially workers, will increase considerably due to several other tax regulations that are also imposed on the public.
Religious Holiday Allowance Tax Regulation
In 2024, the government began implementing a tax policy for Religious Holiday Allowance (THR) received by workers. The legal basis for THR regulation is stipulated in Government Regulation No. 36 of 2021, as amended by Government Regulation 51/2023 on Wages, and Ministry of Manpower Regulation No. 6 of 2016 concerning THR for Workers/Laborers in Companies.
Impact on Middle-Low Income Society
Although the religious THR tax does not affect all social classes like the VAT increase, it should be noted that the VAT increase from 11 percent to 12 percent actually equals a 9.09 percent increase when calculated using the percentage increase formula.
This 9 percent increase is significant and could potentially affect food prices. Meanwhile, discussions about the Provincial Minimum Wage (UMP) increase remain unclear. Labor unions are demanding up to a 10 percent increase, but various sources indicate that the government might only raise the 2025 UMP by less than 5 percent.
If the UMP increase is not proportional to the 9 percent tax increase, the economic conditions of middle-low income society are predicted to worsen due to inflationary pressures.
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