In his testimony, Bhima highlighted the serious impacts of Article 4, paragraphs 1 and 2, as well as Article 7 of the Law on the Harmonization of Tax Regulations (HPP Law), particularly regarding the policy of increasing the Value-Added Tax (VAT) rate to 12%. According to him, this policy creates uncertainty for consumers and business actors and has the potential to weaken household purchasing power.

“Even before the 12% VAT rate was officially enforced, the public had already begun to feel its impact. Due to the regulation allowing the government to flexibly change the VAT rate within a 5–15% range, businesses are left uncertain about the stability of tax policies. In December 2024, several retail businesses had already passed the new rate on to consumers, causing a rise in prices,” Bhima stated. He also noted the absence of a mechanism to refund the 1% excess VAT paid by consumers as a clear sign of the unpreparedness of this policy.

Bhima further presented findings from CELIOS research showing that the 12% VAT policy could reduce economic output by IDR 79.7 trillion, cut household income by IDR 64.8 trillion, and eliminate more than 550,000 jobs within a year.

Meanwhile, Media Wahyudi Askar focused on the regressive impact of the VAT hike on low- to middle-income groups. He argued that the increase in VAT from 10% to 12% in 2025 would further erode the purchasing power of vulnerable groups, whose spending is largely allocated to taxable goods. Although basic necessities are exempt from VAT, the ripple effect on energy and transportation costs could make staples like rice even more expensive.

“VAT is applied uniformly to all consumers, yet poor households spend up to 90% of their income on consumption, while wealthy households spend only 50–60%. Therefore, the VAT increase disproportionately affects lower-income groups,” Media stated during the hearing.
He also criticized the regulatory structure that allows VAT hikes to be enacted through a Government Regulation (PP) without adequate legislative deliberation. This, he argued, limits public participation and weakens the principle of checks and balances in the country’s fiscal governance.