Jakarta. Finance Minister Purbaya Yudhi Sadewa said the government is considering a possible reduction in the value-added tax (VAT) rate to help boost consumer spending amid signs of slowing national economic activity.

“We will assess whether we can lower the VAT rate to support household purchasing power going forward. But we must study it carefully first,” Purbaya said during a press conference in Jakarta on Tuesday.

He explained that before making any decision, the government will review tax revenue performance through the end of the year and evaluate broader economic and welfare indicators.

“We’ll see how things stand at the end of the year -- how the economy performs and how much revenue we collect. It’s still too early to tell,” he said.

Under the Tax Regulation Harmonization Law, Indonesia’s VAT rate was initially set to rise gradually -- from 10 percent to 11 percent in 2022, and then to 12 percent in 2025.

However, due to public resistance over the scheduled increase, the government implemented a selective adjustment. As a result, the 12 percent rate currently applies only to luxury goods, while most goods and services remain taxed at 11 percent.

Economists say a temporary VAT reduction could help stimulate household consumption, which accounts for more than half of Indonesia’s GDP, though it may also narrow fiscal space if not offset by stronger tax collection or spending reallocation.

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