12% VAT to raise Indonesian textile prices, trade bodies want review

"This burden will cascade down the supply chain until it ultimately falls on consumers. Consumers will reduce their spending or shift to cheaper imported goods," its chairman Redma Gita Wirawasta said.

He cautioned that such a scenario would further pressure on the already struggling textile and textile product (TPT) industry.

To mitigate the impact, he suggested the government postpone the VAT hike and focus instead on optimising state revenue through more efficient policies.

"The government should hold off on this plan. The Ministry of Finance seems to be getting complacent, with many pending tasks that could significantly increase state revenue if the Tax Office and Customs worked more diligently," a release from the association quoted Wirawasta as saying.

Chairman of the Indonesian Textile Association Jemmy Kartiwa Sastraatmaja has also expressed his concern about the weak purchasing power of the masses now.

"The increase to 12 per cent VAT will undoubtedly add pressure to consumer purchasing power. We strongly hope the government will reconsider and postpone this decision," Sastraatmaja said.

If the issue of illegal imports of TPT is not addressed, it will worsen the situation, he noted. “Illegal imports are cheaper, and buyers will gravitate toward these goods without considering whether VAT has been paid on them or not," Sastraatmaja explained.

ALCHEMPro News Desk (DS)