Counter Attack from VAT Increase

The reduction of the state budget deficit does not always mean there will be an increase in state revenues, especially when the business world is still recovering from the impact of the pandemic.

KOMPAS/TOTOK WIJAYANTO

Enny Sri Hartati

The government plans to increase the Value Added Tax (VAT) rate in 2022. The planned increase in the VAT rate is intended to increase state revenues to finance economic recovery after the Covid-19 pandemic. Moreover, the realization of tax revenues contracted by 19.7 percent in 2020, only reaching Rp 1.07 quadrillion (US$74.90 billion)

Meanwhile, the government is unlikely to further widen the state budget deficit by increasing debt. The reason is that the 2020 budget deficit had already reached 6.09 percent or Rp 956.3 trillion with an additional debt of Rp 1.22 quadrillion. Likewise, the 2021 budget deficit is estimated at 5.7 percent or Rp 1 quadrillion, with an additional debt of Rp 1.17 quadrillion. As a result, the government\'s debt as of April 2021 has reached Rp 6.52 quadrillion or 41.18 percent of gross domestic product (GDP).