Indonesia’s higher VAT expected to impact hotel, restaurant earnings, staff retention

The Indonesian Hotel and Restaurant Association (IHRA) has warned that the government’s plan to raise value added tax (VAT) would weaken consumers’ purchase and dent business earning, ultimately leading operators to shed manpower for sustainability.

This warning was expressed in response to the government’s plan to adjust VAT from 11 per cent to 12 per cent as of January 1, 2025, so as to feed the state budget.

Sri Mulyani, minister of finance, said during parliament that the VAT increment was decided upon following thorough considerations.