Jakarta, INTI - Social welfare is a key aspect that the government continues to enhance through the implementation of various policy schemes and strategic programs. These policy mixes are designed and implemented by the government, considering the principles of justice and mutual cooperation, along with mitigation measures such as economic incentives.
In a press conference regarding the Economic Policy Package for Social Welfare, on Monday, December 15, Coordinating Minister for Economic Affairs Airlangga Hartarto announced that, in accordance with the mandate of Law Number 7 of 2021 on Tax Harmonization (HPP), the government will impose a Value Added Tax (VAT) of 12% starting from January 1, 2025. This policy is also part of tax reform efforts.
“To ensure that social welfare remains intact, the government has prepared an economic stimulus package that will be provided to various social groups,” said Minister Airlangga.
With a projected VAT exemption incentive amounting to IDR 265.6 trillion in 2025, the government will maintain VAT exemptions or a 0% VAT rate for goods and services needed by the general public and those that affect people's daily lives. These goods and services include essential items such as rice, meat, fish, eggs, vegetables, fresh milk, sugar, education services, health services, public transportation services, labor services, financial services, insurance services, books, polio vaccines, simple and very simple houses, subsidized apartments, and the consumption of electricity and drinking water.
Incentives for Households
For low-income households, the government is offering a VAT exemption (DTP) incentive of 1% from the 12% VAT for Essential Goods and Important Goods (Bapokting) such as cooking oil, wheat flour, and industrial sugar, so the VAT will remain at 11%. This incentive is crucial for maintaining people's purchasing power, particularly in meeting essential needs. Specifically, the incentive for industrial sugar is expected to support the food and beverage processing industry, which contributes 36.3% to the total processing industry.
Additionally, the government has planned the provision of rice assistance of 10 kg per month for low-income households, targeting 16 million recipients in Desil 1 and 2, during January-February 2025. A 50% electricity bill discount for households with a power capacity of up to 2200 VA will also be provided during the same two months to ease the household expenditure burden.
Incentives for the Middle Class
For the middle class, the government has also prepared various policy incentives to maintain purchasing power. These incentives include continuing several previous stimulus measures, such as VAT exemptions (DTP) for property purchases of homes priced up to IDR 5 billion with a tax base up to IDR 2 billion, VAT exemptions for Electric Vehicles (EV) for certain four-wheeled vehicles and buses, as well as tax reductions for EVs, both imported and domestically produced (CKD).
Additionally, new policies are set to be implemented for the middle class, such as the introduction of tax reductions for Hybrid Vehicles (PPnBM DTP), PPh Article 21 DTP for workers in labor-intensive sectors earning up to IDR 10 million per month, optimizing Employment Loss Benefits from the BPJS Employment program as a buffer for workers facing layoffs, with not only cash benefits but also training and job information access. There will also be a 50% discount on Work Accident Insurance (JKK) premiums for labor-intensive industries.
Incentives for Businesses
The government has designed a range of incentives aimed not only at the general public but also at businesses, especially to protect MSMEs and labor-intensive industries, which are the backbone of the national economy. These incentives include the extension of the 0.5% Final Income Tax for MSME Individual Taxpayers (WP OP) who have been benefiting for 7 years, until 2025. MSMEs with an annual turnover of less than IDR 500 million are fully exempt from this tax. The government is also preparing financing for labor-intensive industries to revitalize machinery and increase productivity through an interest subsidy of 5%.
"Once again, we emphasize that this Economic Policy Package is designed to protect the public, support businesses, especially MSMEs and labor-intensive industries, maintain price stability, ensure the supply of essential goods, and accelerate national economic growth," Minister Airlangga concluded.
Luxury Goods Subject to 12% VAT
In line with the principles of justice and mutual cooperation, luxury goods consumed by the affluent—previously not subject to VAT—will now be taxed. This includes premium food items (such as premium rice, fruits, fish, and meat), premium medical health services, premium education services, and electricity for households with consumption of 3500 VA to 6600 VA. These items will now be subject to a 12% VAT.
Also present at the event were Finance Minister Sri Mulyani, Minister for Micro, Small, and Medium Enterprises (UMKM) Maman Abdurrahman, Minister of Manpower Yassierli, Minister of Industry Agus Gumiwang Kartasasmita, Minister of Public Housing Maruarar Sirait, Minister of Trade Budi Santoso, Head of the National Food Agency Arief Prasetyo Adi, Director of PLN Darmawan Prasodjo, and Director of BPJS Employment Anggoro Eko Cahyo.