Lombok. A Finance Ministry official has said that the government's unexpected decision to exempt value-added tax (VAT) on home purchases priced up to Rp 2 billion ($126,000) will not significantly impact tax revenue for the next year.

The tax exemption was announced by President Joko "Jokowi" Widodo during the BNI Investor Daily Summit in Jakarta on Tuesday.

The president revealed that the government will cover the VAT until June 2024, after which a 50 percent VAT discount will be applicable for such purchases.

The objective of this policy is to stimulate public spending in the real estate sector and drive economic activity. According to Dwi Astuti, a spokesperson for the ministry's Taxation Directorate, the revenue from previous years will compensate for any potential VAT loss in the upcoming year.

"Home buyers will be exempt from VAT, and the Ministry's Budget Directorate will cover this using tax revenue from previous years," Dwi said during a media event in Lombok, West Nusa Tenggara.

This incentive is necessary to counteract the slowdown in the real estate sector, as consumers tend to postpone their purchases. 

"Consumers may have the funds but opt to save them due to concerns about geopolitical situations or the upcoming elections," she said.

Core Tax System
The Finance Ministry is set to introduce a fully automated and digitized tax collection system in mid-2024, known as the core tax administration system.

The new system's purpose is to eliminate any potential loopholes for clandestine negotiations between taxpayers and collectors and prevent data duplication.

Iwan Djuniardi, an advisor to the finance minister, disclosed that the preparation for the new system has been relatively swift. The system has been in development since 2018 and is scheduled for implementation on July 1.

Iwan mentioned that several developed nations, such as Finland, Australia, and France, took up to a decade to reform their tax systems.