Indonesia Limits VAT Increase to Luxury Goods

Indonesia has revised its planned increase in the value-added tax (VAT) rate, now set to rise to 12% solely for luxury goods and services, such as private jets and yachts, effective January 1. President Prabowo Subianto announced this decision after significant public backlash and protests, clarifying that essential goods will remain at the current 11% rate. This change comes as part of the government's response to growing discontent regarding the potential economic impact, particularly on low-income households. Despite the limited scope of the increase, labor unions have threatened strikes if it proceeds without a corresponding minimum wage adjustment. Prabowo emphasized that the government will implement support measures to mitigate the effects of the VAT hike, including tax incentives and social aid totaling 38.6 trillion rupiah. Critics remain concerned about the implications for everyday expenses and overall purchasing power.