Jakarta. Retail associations on Tuesday urged the government to reconsider its plan to increase the value-added tax (VAT) rate next year, as businesses and consumers continue to struggle with rising costs and weak demand.

President Prabowo Subianto’s administration has signaled its intent to raise the VAT rate to 12 percent on selected goods and services starting January 1, up from the current 11 percent.

However, this plan has faced significant backlash from businesses and the public, with critics arguing that imposing the hike under current conditions would be counterproductive.

“We hope the new government won’t adopt an arrogant stance. Give us some breathing room and provide stimuli to support businesses. There are many other ways to boost [state revenue] besides raising the VAT,” said Roy Nicholas Mandey, chairman of the Affiliation of Indonesian Global Retail (AGRA), during a forum hosted by B-Universe Media Holdings in Pantai Indah Kapuk 2, Tangerang.

Roy stopped short of calling for the VAT increase to be scrapped altogether but suggested a postponement of one to two years to allow businesses to recover.

Business tycoon Handaka Santosa, chairman of the Indonesian Global Brand Retailers Association (Apregindo), expressed concern that the tax hike could lead to unintended consequences for businesses.

“While the government has the authority to enforce this regulation, it could provoke responses from retailers aiming to mitigate losses caused by the hike,” Handaka said at the same forum.

“For example, if we operate multiple stores in places like Senayan City and nearby Plaza Senayan, we might consider closing some locations and reducing staff to offset the impact,” he added, referring to two luxury shopping centers in Central Jakarta.

Handaka also emphasized that the VAT hike is not set in stone, noting that the government and parliament have the power to amend regulations at any time.

He further highlighted that Indonesia already has one of the highest VAT rates in Southeast Asia, outpacing countries like Singapore, Thailand, Vietnam, and Malaysia.