VAT Cut of One Percent Could Lose 70 Trillion Rupiah Revenue

Finance Minister Purbaya Yudhi Sadewa stated that a one‑percent reduction in the Value‑Added Tax (VAT) could cut state revenue by up to 70 trillion rupiah. He made the comment at the 100 Indonesian Economists gathering in Jakarta on 29 October 2025.

Prior to his appointment, Purbaya had advocated lowering the VAT rate to eight percent, but he now warns that each percentage point matters for fiscal balance. He emphasized that any tariff change must be based on rigorous calculations and reliable data on tax and customs collection. The Ministry of Finance is currently upgrading the tax administration system to obtain a clearer picture of the country’s revenue capacity.

The government aims to have a concrete assessment of the fiscal impact of a VAT cut by the end of the first quarter of 2026. This approach is intended to preserve fiscal stability and avoid widening the budget deficit.