Government Mulls Cutting VAT, Extends Tax Incentive to 2027

On 15 October 2025, Finance Minister Purbaya Yudhi Sadewa announced that the government is reviewing a cut to the VAT rate and extending the 100 % housing VAT incentive (DTP) until 31 December 2027. The incentive means the state will bear the entire VAT on the transfer of new homes. The measure aims to boost the purchasing power of the middle‑class population.

Purbaya clarified that there are no plans to establish a State Revenue Agency, so tax administration will remain under the Ministry of Finance. The ministry reported tax revenue of Rp1,295.3 trillion up to September 2025, a 4.4 % decline year‑on‑year and only 62.4 % of the 2025 projection. The shortfall is attributed to lower commodity prices that reduced the tax base.

A lower VAT rate could lower consumer prices, while the continued housing incentive supports property purchases through 2027. Keeping tax collection within the finance ministry, without a new agency, is expected to sustain a gradual rise in the tax‑to‑GDP ratio. These steps are presented as part of the government’s effort to improve purchasing power and stabilize state revenue. Read the full source at news.ddtc.co.id (https://news.ddtc.co.id/berita/nasional/1814456/pemerintah-pertimbangkan-pangkas-tarif-ppn-demi-tingkatkan-daya-beli).