Purbaya Says VAT Rate Cut Will Wait Until Q1 2026

Indonesia's government plans to draft a new law to lower the Value‑Added Tax (VAT) rate. Finance Minister Purbaya Yudhi Sadewa told reporters at the DJP office on Wednesday, 15 October 2025, that the draft will be submitted to the House of Representatives if the policy proceeds. The legislation will be presented to the DPR for approval.

Purbaya said there is room to reduce the VAT rate, but any decision will depend on the national economic outlook through early 2026. He noted that direct support from the DPR would streamline the process, either through a new RUU or an amendment to the Tax Regulation Harmonization Law (HPP). The ministry will also review current fiscal measures, such as budget efficiency and government fund injections to state‑owned banks.

The minister warned that an uncalibrated VAT cut could widen the fiscal deficit beyond 3 percent of GDP. Consequently, the government will wait until the first quarter of 2026 to assess economic conditions before adopting new fiscal actions. The outcome will affect consumer purchasing power and the country's fiscal balance.