Jakarta: People's Representative Council (DPR) Deputy Speaker Abdul Muhaimin Iskandar sought governmental review on a plan to impose value-added tax on basic necessities as stipulated in revision of Law No. 6 of 1983 on general taxation provisions and procedures.
"I think it (the plan) needs to be reviewed, the more so because it is launched during the pandemic and difficult economy," Iskandar noted in a written statement released on Thursday.
The plan, if realized, will potentially be burdensome to the public and counterproductive to the government's efforts to deal with disparities through tax reforms, he remarked.
Iskandar noted that the imposition of value-added tax on basic necessities will increase the people's burden since the turnover of traders at markets tanked over 50 percent.
"If basic necessities are excluded from the types of VAT-free goods, of course, the policy will harm the public because basic necessities are part of their essential needs," he remarked.
The chief of the Nation Awakening Party (PKB) remarked that if basic necessities are subject to VAT, it will have a domino effect in which the purchasing power of the public will decline since it will make it difficult for employees and workers and economy to rise.
Meanwhile, People's Consultative Assembly (MPR) Deputy Speaker Arsul Sani questioned the government's plan to impose VAT on basic necessities, stressing it will potentially clash with the Pancasila state ideology’s fifth tenet on social justice.
"The constitutionality of the policy is open to questions if it is really to be incorporated into law on general taxation provisions," he noted here on Thursday.
The policy is open to a lawsuit on grounds that it runs counter to article 33, paragraph 4 of the 1945 Constitution, especially the principles of togetherness, justice efficiency, and balance of national economic unity, he remarked.
Sani stated recently that the government had relaxed the taxation policy by lowering the luxury sales tax on cars with certain categories.
"As a matter of fact, the policy benefits only a handful of people, particularly those belonging to the middle and upper class groups, who can afford to buy cars and enjoying the luxury sales tax reduction. This means the government is willing to lose one of its fiscal income sources," he pointed out.
However, if the government imposes tax on food stuffs in exchange for the lost fiscal income source, then its commitment to social justice for the entire Indonesian nation will be worth questioning, he pointed out.
Finance Minister Sri Mulyani Indrawati stressed earlier that the government had continued to focus on recovering the national economy, so she expressed regret over the public uproar related to the plan to impose VAT on basic necessities.
"The government really uses the state budget instrument. This is because our objective is to recover the economy from the demand side and supply side," Indrawati stated at a working meeting with the House of Representatives (DPR) Commission XI in Jakarta on Thursday.
Indrawati noted that the draft of the law on general taxation provisions and procedures had just arrived at the DPR, so the uproar is highly regrettable.