Tax relief for the public through government borne tax (DTP) for purchasing property and electric vehicles only benefits the well-off. This policy is considered not to touch the lower middle class. This was stated by Macroeconomic Researcher from Next Policy Shofie Azzahra when contacted, Sunday (3/11).
“For low-income people, this policy may not have an impact on their purchasing power or direct consumption, because the focus of their needs is more on basic goods and services such as food, transportation and education,” he said.
Value Added Tax (VAT) DTP on property, for example, can only be felt by the upper middle class who have better financial capabilities. This group tends to be more ready to invest in the property or electric vehicle sector, so the tax incentive policy will directly benefit them.
Likewise with PPnBM incentives for purchasing electric vehicles. Shofie believes that electric vehicles, especially cars, are more accessible to certain groups with high purchasing power. In other words, incentives tend to be more profitable for groups of people who are financially well off, so their impact on people’s purchasing power in general is still limited.
However, Shofie also understands the aim and purpose of providing tax incentives. In the property sector, it is believed that policy makers want the opportunity for people to own decent housing to be more open. On the other hand, this incentive will also have a fairly wide spillover effect because there are so many sectors under property.
Meanwhile, incentives for PPnBM for electric vehicles are considered a strategic step to encourage the use of clean energy. “This step is in line with the government’s commitment to improving long-term environmental sustainability,” said Shofie.
He believes that the government needs to expand PPnBM incentives for electric vehicles targeting the lower middle class. This means that the expansion of PPnBM incentives for electric vehicles must be mostly aimed at two-wheeled vehicles. “Electric motorbikes can be a more affordable alternative for people who need daily transportation, especially in urban areas,” said Shofie.
“By expanding incentives in this category, it is hoped that the policy can reach a wider layer of society, so that it not only supports the adoption of environmentally friendly technology but is also more relevant to the mobility needs of people affected by the decline in purchasing power,” he continued.
Furthermore, the incentives which are considered to favor the upper middle class must be balanced by maintaining the purchasing power of the lower middle class. One thing that can be done is to postpone the increase in the VAT rate to 12%
This is because the 12% VAT increase will affect the prices of goods and services consumed and used by the entire community. This will certainly increase the burden on the lower middle class.
“So, although the VAT DTP incentives for property and PPnBM for electric vehicles can encourage consumption in this sector, the benefits are limited to the upper middle class who have higher purchasing power,” said Shofie.
“Because this incentive targets certain sectors, its ability to offset the pressure of the VAT increase on people’s daily consumption, especially in the lower classes, is very limited. Therefore, this policy needs to be reviewed again so that the incentives given to the public are more targeted at people who are indeed affected by the decline this purchasing power,” he concluded. (Z-11)
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**Interview with Shofie Azzahra, Macroeconomic Researcher at Next Policy**
**Editor:** Thank you for joining us today, Shofie. Your insights on tax policies in Indonesia, especially regarding the COVID-19 response, have been quite illuminating. Let’s dive into the recent tax relief measures regarding property and electric vehicles. How do you assess these policies in terms of their impact on different socioeconomic groups?
**Shofie Azzahra:** Thank you for having me. The current tax relief measures, particularly the government borne tax (DTP) for property and electric vehicles, predominantly benefit the upper-middle class and wealthier individuals. These groups have the financial capability to invest in property or purchase electric vehicles, making the tax incentives less effective for the lower middle class.
**Editor:** That’s an interesting point. You mentioned that low-income individuals may not see any significant impact from these policies. Can you elaborate on that?
**Shofie Azzahra:** Certainly. For low-income households, their primary concerns revolve around basic necessities such as food, transportation, and education. They are less likely to be in the market for new property or electric cars. The current tax incentives do not address their immediate needs, which diminishes any potential benefit these policies might provide in terms of purchasing power.
**Editor:** Given this disparity, what do you think could be done to make these incentives more inclusive?
**Shofie Azzahra:** I believe the government should consider expanding the PPnBM incentives specifically for low-income groups, particularly focusing on electric two-wheeled vehicles, which are typically more affordable. This could have a more meaningful impact on daily transportation needs for a larger segment of the population.
**Editor:** You also mentioned that these tax incentives have a broader aim, such as improving housing access and promoting clean energy. How do you reconcile these objectives with the limitations we’ve discussed?
**Shofie Azzahra:** While the incentives are aimed at facilitating homeownership and encouraging clean energy use, we must ensure that these benefits are designed in a way that also supports lower-income individuals. Recognizing their needs can create a more equitable tax system and foster long-term economic stability. The spillover effects can be significant, particularly in the property sector, but inclusivity should be a priority in the implementation of these policies.
**Editor:** Thank you, Shofie, for your thoughtful analysis. It’s clear that while the intentions are good, there’s a pressing need for these tax policies to reach and support the most vulnerable groups in society.
**Shofie Azzahra:** Thank you for the opportunity to discuss these crucial issues. It’s essential for policymakers to remain aware of the diverse impacts of tax measures to ensure they truly benefit all segments of society.