In 2025, the fixed Value Added Tax (VAT) rate of 11% remains a key government strategy to strengthen state revenue. First implemented in April 2022 through the Harmonized Tax Law (UU HPP), this rate aims to support state financing, particularly in building infrastructure and public services in the post-COVID-19 era. The policy reflects the government’s efforts to create a more modern and responsive taxation system to meet development needs.

However, the challenges in 2025 are becoming increasingly complex, considering both global and domestic economic dynamics. The sustained VAT increase has raised concerns about the purchasing power of the public, especially among low-income groups affected by inflation and rising prices of goods. Although the government has exempted essential goods and services—such as basic necessities, healthcare, and education—from VAT, issues related to equitable distribution and access to affordable goods remain a concern. For businesses, particularly MSMEs, the continued VAT rate poses challenges in maintaining competitiveness, especially amid stiff regional and global competition.

On the other hand, in 2025, the government leverages digitalization in tax management to improve compliance and efficiency. Technology-based taxation systems, such as e-invoicing and online reporting, simplify monitoring and reduce tax evasion practices. If implemented effectively, the fixed 11% VAT policy could serve as a driver of a stable and equitable economy, provided the government remains committed to supporting businesses and ensuring that tax revenues are allocated toward society’s priority needs.