Jakarta, July 9, 2025 — The Center of Economic and Law Studies (CELIOS) was formally invited to present expert testimony at the Constitutional Court hearing on the judicial review of Law No. 7 of 2021 on Value-Added Tax (VAT). CELIOS was represented by Bhima Yudhistira Adhinegara, Economist and Executive Director, and Media Wahyudi Askar, Director of Public Policy. The hearing focused on the implications of Articles 4 and 7 of the Law on the Harmonization of Tax Regulations (UU HPP), particularly the policy to raise VAT to 12%.
Bhima Yudhistira argued that the policy risks weakening purchasing power, creating uncertainty for businesses, and reflecting inadequate regulatory preparedness. CELIOS research estimates that 12% VAT could reduce national output by up to IDR 79.7 trillion, lower household income by IDR 64.8 trillion, and eliminate more than 550,000 jobs in just one year. Bhima also highlighted consumer losses from overpaying 1% VAT without a refund mechanism, as well as the fact that some retailers had already raised prices before the official rate took effect.
Media Wahyudi emphasized the regressive impact of the VAT increase, with low- and middle-income households bearing the heaviest burden because up to 90% of their income is spent on consumption. Higher energy and transport costs also push up the prices of basic necessities, putting further pressure on vulnerable groups. He also criticized a regulatory structure that allows VAT increases through Government Regulations without legislative debate, ultimately reducing public participation and weakening the principle of checks and balances in fiscal policy.
CELIOS was formally invited to present expert testimony in the Constitutional Court’s judicial review of Law No. 7 of 2021 on Value-Added Tax (VAT). Representing CELIOS were Bhima Yudhistira Adhinegara , Economist and Executive Director, and Media Wahyudi Askar , Tax Policy Director. The session focused on the implications of Articles 4 and 7 of the Law on the Harmonization of Tax Regulations (UU HPP), particularly the policy to raise VAT to 12%.
Bhima Yudhistira argued that the policy risks weakening purchasing power, creating uncertainty for businesses, and reflecting poor policy preparedness. CELIOS research projects that a 12% VAT could cut national output by IDR 79.7 trillion, reduce household income by IDR 64.8 trillion, and cost over 550,000 jobs within a year. Bhima also highlighted consumer losses due to excess VAT payments without a refund mechanism, while noting that even before the rate officially applied, retailers had begun passing on higher costs.
Media Wahyudi emphasized the regressive impact, with lower- and middle-income households bearing the heaviest burden as up to 90% of their income goes to consumption. Rising energy and transport costs further drive up food prices, disproportionately affecting the poor. He also raised concerns over the regulatory structure that enables VAT hikes via Government Regulations without legislative oversight, undermining checks and balances in fiscal policymaking.
EXPERT TESTIMONY BY BHIMA YUDHISTIRA ADHINEGARA (1) Download
Expert Witness Testimony by Media Wahyudi Askar Download