The government’s plan to extend the validity period of government-borne tax incentives (DTP) in the property and electric vehicle sectors is considered to not do much to restore the purchasing power of the majority of people. This is because consumption in these two sectors is dominated by upper-middle class groups.
“The direct impact of this policy on increasing aggregate consumption may be limited. In the context of the impact on household consumption levels, this stimulus is estimated to only have a moderate impact,” said researcher from the Indonesian Center for Reform on Economics (CoRE) Yusuf Rendy Manilet when contacted, Sunday (3/11).
This limited and moderate impact, he continued, is because the reduction in prices of property and electric vehicles is mostly enjoyed by the upper middle class. Therefore, it is considered that this policy will not help much in the growth of people’s purchasing power in general at a high level.
Efforts to increase people’s purchasing power are also likely to be hampered by plans to increase the Value Added Tax (VAT) rate to 12% in 2025. The existence of property and electric vehicle DTP tax incentives, added Yusuf, will not be able to stem the impact of the increase in the VAT rate.
“The scope of goods and services affected by the VAT increase is much wider than the sectors that receive incentives. The VAT increase will affect the daily consumption of people from all levels, while incentives only target certain segments. The psychological impact of increasing general prices due to 12% VAT can reduce consumer sentiment more broadly,” he explained.
Therefore, said Yusuf, the government needs to expand the scope of DTP tax incentives to other sectors that have a direct impact on the wider community. Some of them are incentives for basic commodities and public transportation.
Apart from that, it is also necessary for the government to combine policies by providing more targeted social assistance. “It is also necessary to consider postponing the VAT increase until economic conditions are more conducive,” explained Yusuf.
Furthermore, the government also needs to pay attention to aspects of budget sustainability. Don’t let the tax stimuli provided actually create new problems for fiscal instruments.
“Providing tax incentives means reducing state revenues, while on the other hand there is a need to keep the budget deficit under control. Therefore, the government needs to plan exit strategy clear explanation for this policy, including criteria and timeline which is measurable for fase-out incentives when economic conditions start to improve,” concluded Yusuf. (E-2)
#enjoyed #upper #middle #class #extension #tax #stimulus #difficult #pull #peoples #purchasing #power
**Interview with Yusuf Rendy Manilet on Tax Incentives and Their Impact on Purchasing Power**
*Interviewer:* Thank you for joining us, Yusuf. Let’s dive into the government’s proposal to extend tax incentives in the property and electric vehicle sectors. Can you explain why you believe these incentives may not significantly improve overall purchasing power?
*Yusuf Rendy Manilet:* Thank you for having me. The main issue is that the benefits of these tax incentives primarily reach the upper-middle class. Consequently, any positive effect on aggregate consumption will be limited. While these groups might enjoy lower prices in property and electric vehicles, the average household is unlikely to experience substantial benefits.
*Interviewer:* So, would you say the government’s strategy is not inclusive enough to benefit the majority?
*Yusuf Rendy Manilet:* Precisely. The policy focuses on sectors where consumption is concentrated among wealthier groups. This restrictive reach means that the broader population, especially lower-income households, will not see much change in their economic situations or purchasing power.
*Interviewer:* You also mentioned an anticipated increase in the Value Added Tax (VAT) rate to 12% in 2025. How do you see this affecting consumers, particularly when paired with these tax incentives?
*Yusuf Rendy Manilet:* The VAT increase will likely outweigh any benefits from the DTP tax incentives. The increase affects a broad range of goods and services, which will burden households further. As a result, the purported benefits of the tax incentives might be overshadowed by rising costs in other areas, limiting their overall effectiveness.
*Interviewer:* Are there alternative strategies you would suggest for the government to enhance purchasing power more effectively?
*Yusuf Rendy Manilet:* The government should consider more targeted support aimed at lower-income households. This could include direct financial assistance, subsidies for essential goods, or broader taxation reforms that alleviate the financial pressure on those who need it most. By focusing on inclusivity, we could see a more pronounced positive impact on purchasing power across different socioeconomic classes.
*Interviewer:* Thank you, Yusuf, for your insights. It’s clear that while tax incentives have their place, a broader and more inclusive strategy may be necessary for real economic improvement.
*Yusuf Rendy Manilet:* Thank you for having me. It’s a vital conversation to have as we navigate these complex economic challenges.
