VAT and Purchasing Power

Revenues from tax are also needed to reduce the income gap, prevent stunting and improve the quality of health and education services, as well as to provide decent jobs and social assistance.

KOMPAS/PRIYOMBODO

A man looks at footwear products at one of the outlets in a shopping center in the Kebayoran Lama area, South Jakarta, Monday (4/4/2022). As of April 1, 2022, the government has increased the rate of Value Added Tax or VAT from 10 percent to 11 percent.

Starting April 1, valued added tax (VAT) of 11 percent, increased from 10 percent previously, came into effect. It is feared that the higher VAT could potentially add to the people’s burden.

By definition, VAT is consumption tax that is levied on goods and services at each stage of the supply chain where value is added, from production to their distribution to consumers. Consumers pay the tax, except on goods and services that are exempt from VAT.