YLKI Welcomes the Cancellation of VAT on Basic Foods, Health and Education Services

The government will cancel the value added tax (VAT) for basic necessities in 2022. This is stated in the Law (UU) on the Harmonization of Tax Regulations (HPP) which was recently passed at the plenary meeting of the House of Representatives (DPR) on Thursday ( 8/10).

Certain medical health services, social services, financial services, insurance services, education services, public transportation services, and labor services are also free from tax levies.

Chairman of the Daily Board of the Indonesian Consumers Foundation (YLKI), Tulus Abadi in a Webinar (Photo: screenshot)

Chairman of the Daily Management of the Indonesian Consumers Foundation (YLKI), Tulus Abadi in a Webinar (Photo: screenshot)

In response to the cancellation, the Executive Director of the Indonesian Consumers Foundation (YLKI) Tulus Abadi told Mouab, Friday (8/10) that he strongly supports the decision. He emphasized that from the beginning YLKI had rejected the discourse of applying VAT to basic necessities, health and education services.

“Indeed, since the beginning YLKI has been quite adamant in rejecting the existence of VAT on foodstuffs, VAT on education, and VAT on health. In our initial releases, it was clear that we strongly rejected the imposition of VAT on foodstuffs,” said Tulus.

Tulus even underlined that the first discourse on food VAT of one percent for traditional markets is still considered unethical and inhumane because food is a basic need and human right.

According to Tulus, YLKI still tolerates the imposition of VAT on premium or super class foodstuffs. But the question and at the same time concern is whether the government can control the implementation of the policy so that it does not cause psychological effects on non-premium food ingredients.

For this reason, Tulus suggested that the government should not apply VAT to premium foodstuffs. Moreover, these foodstuffs were previously known as import taxes. In addition, VAT for premium foodstuffs is small in number so it is not significant to reap state revenue from taxes.

A woman wearing a mask to prevent the spread of COVID-19 is shopping at a traditional market in Jakarta, March 1, 2021. (Photo: Willy Kurniawan/Reuters)

A woman wearing a mask to prevent the spread of COVID-19 is shopping at a traditional market in Jakarta, March 1, 2021. (Photo: Willy Kurniawan/Reuters)

Tulus asked the government to be more creative in finding sources of state revenue whose potential for taxation is much larger but currently not explored.

“For example, how to intensify the increase in cigarette excise, which is still very small. If it is taken seriously in accordance with the Excise Law, even if the amount is 57 percent, the government’s revenue will soar significantly from cigarette excise income,” said Tulus.

YLKI also proposed that the government impose an excise duty on sweetened drinks and an excise duty on plastics. According to Tulus, the imposition of a plastic excise tax is important as part of efforts to control plastic waste and protect the environment, but the government does not have the guts to deal with entrepreneurs.

Tulus added that VAT can also be imposed on fuel oil (BBM) because fuel contributes to global climate change.

When it comes to VAT on education and health, Tulus emphasized that these two sectors are human rights that must be fulfilled by the state and do not deserve to be taxed. If you want to target private education, he said that VAT is irrelevant because not all the people who go to private educational institutions are rich.

Basic necessities, such as rice and sugar, are the most pressing needs revealed by this survey.  (Photo: Courtesy/Humas Jabar)

Basic necessities, such as rice and sugar, are the most pressing needs revealed by this survey. (Photo: Courtesy/Humas Jabar)

Basic Food Was Not Included in the List of Taxable Goods

Deputy Chairman of the House of Representatives Commission XI Dolfie OFP said in article 16B of the Law on the Harmonization of Tax Regulations it was explained that basic necessities were not included in the list of goods subject to tax.

In addition to basic necessities, certain health services, social services, financial services, insurance services, education services, public transportation services and labor services are also free from tax levies.

Minister of Finance Sri Mulyani.  (Courtesy: KLI Bureau-Ministry of Finance)

Minister of Finance Sri Mulyani. (Courtesy: KLI Bureau-Ministry of Finance)

Finance Minister Sri Mulyani said the government and the House of Representatives agreed that the Law on Harmonization of Tax Regulations would not inconvenience many people. One of them is by providing tax exemption facilities for basic goods, health services and education services.

However, the government will impose a value added tax for some basic needs of the upper middle class, such as premium staple foods (sembako). However, he did not specify what groceries he meant.

“But if we talk about the basic needs, let’s say rice, there is rice that costs Rp. 10 thousand per kilo, which our farmers produce Rojolele, Pandan Wangi, Cianjur versus the current rice Sirataki. I know Basmati. If you look at the price, which is Rp. 10 thousand per kilo, Rp. 50 thousand per kilo up to Rp. 200 thousand per kilo. This may be what needs the phenomenon of the emergence of high-end products, “said Sri. [fw/em]

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