inp.polri.go.id - Jakarta. Tax observer from the Center for Indonesian Taxation Analysis (CITA), Fajry Akbar, suggested that the planned VAT rate reduction needs to be thoroughly reviewed.
He stated that tax reductions will not automatically maintain people's purchasing power amidst economic uncertainty.
Fajry also explained that the main cause of weak purchasing power does not stem from fiscal policy, but rather from the high level of business uncertainty in the community.
"The main problem lies in the low confidence of business actors in expanding. This is due to the high level of uncertainty (economic turmoil)," he said on Saturday (10/18/2025).
He further emphasized that improving purchasing power should be achieved by creating economic certainty and a conducive business climate. According to him, business actors will be more confident in investing if government policies do not change suddenly.
"When business actors are confident in the direction of policy, investment and employment will grow more rapidly. But this is different if government policies are constantly changing," he explained.
Fajry Akbar believes that reducing the VAT rate could potentially significantly reduce state revenue. The government should be cautious, as the fiscal deficit could increase if revenues decrease significantly.
"If the VAT rate is reduced by just 1 percent, the potential revenue loss could reach one hundred trillion Rupiah. Therefore, careful policymaking is needed," he explained.
He reminded that the contribution of VAT and Luxury Goods Sales Tax (PPN) to the State Budget (APBN) reaches approximately 42 percent of total revenue. If this policy is implemented without compensatory spending reductions, the fiscal risks will increase.
"With state spending continuing to increase, especially for social programs, the potential deficit is becoming increasingly difficult to control," he explained.
Concluding, he emphasized the importance of consistent government policy to maintain a stable economic climate and maintain business confidence. Frequent policy changes can create new uncertainties for the business world.
(ad/fa/pr/rs)
