Jakarta. The government has no plan to increase the rate of value-added tax on the sales of goods and services from currently 11 percent for next year, Finance Minister Sri Mulyani Indrawati has said.

According to the Law on Harmonization of Tax Regulations, the government is allowed to increase the VAT rate to 12 percent at any time until January 1, 2025.

"We consider the strong economic growth and tax revenues as the foundation to keep the momentum of the economic recovery. Accordingly, for the next State Budget Law, we will apply the same rate [of the VAT],” the minister said in a hearing with lawmakers on Friday.

By law, however, the VAT rate will increase to 12 percent in 2025.

She said the state budget bill is being drafted amid the escalating geopolitical tension triggered by the Russia-Ukraine war and disruptions in the global economy due to the rapidly advancing information technology that may lead to massive “labor-saving decisions” and new problems in cyber security.

“This situation may cause the unemployment rate to increase sharply, especially among the group of the unskilled and uneducated labor force, unless we take necessary anticipatory measures now,” Sri Mulyani said.

"The implementation of the inflation reduction act in the United States and the carbon border adjustment mechanism in the European Union can potentially become non-tariff trade and investment barriers and reduce funding for developing countries,” she added.

Tax analyst Darussalam said earlier the 11 percent VAT rate in Indonesia is relatively lower when compared to the regional and global averages.

The VAT rate in 127 countries globally averages 15.4 percent, versus 12 percent in 31 Asian countries, said Darussalam, the co-founder of Jakarta-based Danny Darussalam Tax Center.

But in Southeast Asia, the VAT rate stands in a range of seven to 12 percent.

“The 11 percent VAT rate remains below the global average and the rate among 31 Asian countries. The government has decided the phased implementation of the VAT rate until it eventually reaches 12 percent to avoid burden [to taxpayers],” Darussalam said.