Jakarta. Finance Minister Sri Mulyani Indrawati confirmed on Thursday that the new value-added tax (VAT) rate of 12 percent will be implemented on January 1, in line with the 2021 taxation law.

Despite mounting calls for a delay since President Prabowo Subianto assumed office on October 20, Sri Mulyani informed lawmakers that the current state budget and fiscal conditions do not support a postponement.

The government needs to increase state revenue to sustain the post-pandemic economic recovery, she explained.

“Tax policies, including the new VAT, have been carefully designed, taking into account the health sector and the basic needs of the people,” Sri Mulyani said during a hearing with the House of Representatives' Commission XI at the legislative building in Jakarta.

She stressed the importance of keeping the state budget "healthy" to address potential financial crises and ongoing geopolitical tensions.

The government and parliament have previously agreed on a gradual VAT increase: from 10 percent to 11 percent in April 2022, with the final increase to 12 percent set for 2025.

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