Jakarta. Amid plans to increase the Value Added Tax (VAT) from 11 percent to 12 percent, raising concerns among many Indonesians, the House of Representatives (DPR) has decided to include the Tax Amnesty Bill in the 2025 National Legislation Program (Prolegnas).

The first tax amnesty program ran from 2016 to 2017, offering tax evaders the opportunity to declare their hidden assets and back taxes for a significantly lower payment than if they were caught by authorities. The program ended in 2023.

DPR’s Commission XI Chairman, Misbakhun, said the House would discuss the inclusion of the Tax Amnesty Bill and its regulatory details with the Finance Ministry. According to Misbakhun, the program would be thoroughly discussed to determine whether it would be a legislative initiative or a government proposal.

"We will discuss the mechanism with the government. If it is prioritized, it will become part of the 2025 agenda," Misbakhun said during a meeting at the National Development Planning Agency (Bappenas) on Tuesday.

When asked for further details, Misbakhun did not specify which sectors would be included in the program, saying that the DPR would await further input from the government. 

The first phase of the tax amnesty program ran from June 28 to Dec. 31, 2016. The second phase, called the Voluntary Disclosure Program (PPS), lasted from Jan. 1 to June 30, 2022. By the end of the PPS on June 30, 2022, the Finance Ministry reported that disclosed assets totaled Rp 594.82 trillion, with tax payments amounting to Rp 61.01 trillion.

Misbakhun suggested that the tax amnesty program could be implemented in 2025, as its timing aligns with the end of the 2024 tax year. This would give the government and citizens an opportunity to reorganize the taxation sector comprehensively. "In my opinion, it should be in 2025 because that year marks the cutoff for tax amnesty related to the 2024 tax period, allowing us to settle our tax matters," Misbakhun said.

VAT Increase

The House of Representatives has deferred the decision to increase the Value Added Tax (VAT) to the government. The lawmakers have distanced themselves from the decision, despite widespread public opposition to the policy.

The VAT hike is being implemented under the 2022 Taxation Regulation Harmonization Law. Article 7 of the law stipulates that the VAT rate of 11 percent, which took effect on April 1, 2022, will increase to 12 percent no later than Jan. 1, 2025.

"We fully leave this matter to the government. It is up to them to decide whether the VAT increase to 12 percent will be implemented or not," said Misbakhun.

Misbakhun acknowledged that the government would consider several factors when deciding whether to implement the VAT hike. He also recognized that the country’s middle class has declined by 10 million people, which has affected their purchasing power.

"The policy could proceed if the government still believes that the economic situation is stable and that consumer purchasing power has not been significantly impacted," he added.

Finance Minister Sri Mulyani Indrawati confirmed last week that the 12 percent VAT rate will be implemented on January 1, in line with the taxation law

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