Banggar DPR Asks Government to Postpone 11% VAT Increase
The Budget Agency (Banggar) of the House of Representatives (DPR) asked the government to postpone the increase in Value Added Tax (PPN), especially for VAT on imported commodity goods. It is feared that the price increases that often occur will increase the burden on the people. With the Covid-19 pandemic situation not over yet and the Russo-Ukrainian war causing prices to skyrocket.
This is because Russia is the largest wheat producer in the world, as well as a major producer of commodities such as oil, gas and various strategic mineral products such as gold, coal, nickel, aluminium, copper, cobalt, titanium and steel.
As a result of sanctions imposed by Western countries on Russia a few weeks ago, the supply of these commodities has increased in the past month, such as Brent oil by 16.37%, WTI oil by 14.63%, natural gas by 18.55%. , gold by 8.08%, silver by 11.40%, copper by 3.01%, and platinum by 5.26%.
In addition, increases in the food sector also occurred in the past month, such as wheat rose 38.74%, corn 16.71%, sugar 5.21%. The increase in the prices of the world's main commodities has made a number of countries in Europe, America and Latin America face dramatic high inflationary pressures.
"Although BPS and BI have not released the latest inflation data, especially in the range of March 2022, when the war in Ukraine raged, but seeing the upward trend in the prices of various major world commodities, it is highly likely that inflationary pressures in some commodity sectors will be unavoidable," said the Head of the Agency. DPR budget, Said Abdullah from a written statement quoted by detik.com, Saturday (12/3/2022).
He also said that there would be a large potential for an increase in inflation to occur, as well as supply chain and stock limitations that could occur. One of them, as already felt, is the increase and scarcity of cooking oil. If the cost of production rises, it will affect consumers or the Indonesian people themselves. To that end, the government is expected to take the following strategic steps:
- Does not apply the provisions of Article 7 paragraph 1 letter a of Law No. 7 of 2021 concerning Harmonization of Tax Regulations (HPP) for all types of goods subject to Value Added Tax (VAT). Article 7 paragraph 1 letter a of Law No. 7 of 2021 states that VAT of 11% will be applied starting April 1, 2022.
- Article 7 paragraph 3 of Law No. 7 of 2021 gives the government the power to change the VAT rate from 11% to a minimum of 5% and a maximum of 15%. Article 7 paragraph 3 is a powerful weapon for the government to implement various tax incentives and disincentives policies in supporting the national economy. With this authority, we expect the government to reduce the VAT rate to below 11% for various strategic commodities whose supply is supplied from imports such as oil and natural gas, soybeans, salt, sugar, chili, garlic, and wheat. This is because the various strategic commodities have been included in the category of public goods and each increase has a broad effect, and burdens the people's daily needs.
- On the other hand, for various commodities that do not have a broad impact on the daily needs of the people, the government can compensate for the lack of VAT receipts, which because the rates are lowered as suggested above, the government can impose VAT rates above 11% on goods to the VAT, for example on luxury goods and goods. various non-primary consumer goods such as electronics.
- The government needs to prepare risk mitigation for possible supply chain stagnation, especially our main commodities that rely on imports, as well as develop various non-tax policy instruments that can reduce the price burden that will be faced by producers.
