The Indonesian government's plan to increase the Value Added Tax (VAT) from 11% to 12% starting in January 2025 will affect the bottomline of the sector, according to the chairman of the Indonesian General Insurance Association (AAUI) Mr Budi Herawan.
Speaking during a media briefing last week, he said that the sector would have a hard time growing in 2025 if the VAT increase was not deferred.
Adding to Mr Budi’s remarks, Ms Trinita Situmeang, AAUI deputy chair for Statistics & Research, indicated that the VAT increase could result in the buying of insurance becoming lower on the priority list of consumers.
Officials have mentioned that the increase will be in compliance with laws mandating a VAT rise by 2025, and preparations are underway to roll out subsidies to mitigate its impact on purchasing power. Currently, VAT applies to the delivery or sale of goods and services within Indonesia at a rate of 11%, with some exceptions.