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PPN 12% Effective 2025: The Alarming Consequences For Retail Malls

The proposed increase in the Value Added Tax (VAT) from 11% to 12% in 2025 has raised significant concerns among business owners, particularly in the retail and shopping center sectors. They anticipate that this increase will not only lead to a surge in product prices but will also further diminish the purchasing power of the public, especially among the lower middle class, which is a crucial segment of Indonesia's economy.

Alphonzus Widjaja, the Chairman of the Indonesian Shopping Center Management Association (APPBI), stated that consumer purchasing power has already shown signs of weakening since the beginning of 2024. He believes that the implementation of the 12% VAT will exacerbate the situation, resulting in higher prices for goods and ultimately reducing the public's ability to make purchases.

"From the outset, we have urged the government to postpone the VAT increase from 11% to 12%, as it poses a risk of further diminishing the purchasing power of the lower middle class. This VAT hike will impact product prices, leading to an increase in costs," Alphonzus remarked during a meeting at Hotel Santika ICE BSD Tangerang last Friday, as reported on Sunday (November 17, 2024).

Alphonzus emphasized that consumer purchasing power is a key driver of Indonesia's economic growth, with household consumption accounting for 57% of the total Gross Domestic Product (GDP). He expressed concern that a decline in purchasing power could hinder the government's goal of achieving an 8% economic growth rate.

"The structure of Indonesian society is predominantly composed of the lower middle class. If this segment is disrupted, it will also affect Indonesia's economic growth. Household consumption contributes nearly 57% to the economy, so this will influence the growth rate, especially since the government has set a target of 8%," he explained.

At the same occasion, the Chairman of the Indonesian Retailers and Shopping Center Tenants Association (Hippindo), Budihardjo Iduansjah, also expressed his concerns. He stated that the increase in Value Added Tax (VAT) would impose an additional burden on business operators, particularly regarding liquidity.

Budihardjo assesses that the increase in the Value Added Tax (VAT) to 12% will impact the cash flow of business operators, particularly because they are required to pay taxes upfront even when payments from consumers have not been fully received.

"This means that at times we must remit taxes even before we have received payment. A 12% VAT is quite substantial. Therefore, liquidity is indeed absorbed by the tax," stated Budi.

Tag: APPBI Retail And Shopping Value Added Tax