Jakarta. The government has the authority to delay the planned increase in value-added tax (VAT) without needing to amend the existing taxation law, House of Representatives member Dolfie Othniel Frederic Palit said on Wednesday.

Finance Minister Sri Mulyani Indrawati previously announced that the VAT rate would increase to 12 percent -- up from the current 11 percent -- starting January 1, as stipulated by the 2021 Tax Harmonization Law.

However, Dolfie clarified that the law does not explicitly mandate the hike on New Year’s Day. Instead, it allows the government to adjust VAT rates within a range of 5 percent to 15 percent.

This means that keeping VAT at 11 percent is still within the legal framework. 

“There’s no need to amend the law because it permits this flexibility,” Dolfie said at the legislature complex in Jakarta.

The Indonesian Democratic Party of Struggle (PDI-P) politician pointed out that most citizens are opposed to the VAT hike, even though the law provides room for such adjustments. He argued that the law, passed in 2021, was enacted under circumstances that differ significantly from the current economic situation.

“When the 2025 budget was being drafted in September, we asked the government whether the 12 percent VAT would be delayed, given today’s vastly different economic conditions compared to 2021,” Dolfie said.

“It seems the decision has been left to the new administration,” he added.

Prabowo Subianto was sworn in as president on October 20, succeeding Joko Widodo.

“We in the House of Representatives are still awaiting the government’s official stance on this matter. However, it’s important to note that the VAT rate could also be reduced, provided there is approval from the House,” Dolfie said.
 

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