In October, the Government of Indonesia published the Harmonization of Tax Regulations (HPP Law) detailing: the new tax measures in tax reform law, higher income tax rate for wealthy individuals, and plans for a new carbon tax mechanism. The legislation calls for a tax hike to the value-added tax rate from 10% to 11% effective 1 April 2022. The VAT rate will gradually increase by 1 January 2025 to 12%. This will apply to sales of nearly all goods and services.
The law intends to increase revenue collection for economic recovery and improve tax compliance. The country aims to bounce back after taking a big hit on 2020 and this year due to the Coronavirus pandemic (for more information, please see INDONESIA: COVID-19 VAT IMPLICATIONS). All of the political parties but one in parliament approved the legislation.