By Rania Teguh

East Asia Forum-Jan 15, 2025

Indonesian President Prabowo Subianto caused substantial uncertainty after reversing a value-added tax (VAT) increase from 11 to 12 per cent, deciding it would only apply to luxury goods. This undermines trust in government policy and creates an unpredictable investment environment. The VAT hike was initially intended to boost state revenue and fund infrastructure and education, but the reversal could affect Indonesia’s ability to meet revenue targets and address broader inequities, with further impacts on the already shrinking middle class and slowing economic growth. Read more at: https://eastasiaforum.org/2025/01/15/trust-wavers-as-indonesia-reverses-vat-hike/ First published in East Asia Forum