<![CDATA[Value-added tax is widely regarded as an efficient source of public revenue, but its consumption-based structure raises important questions concerning distributional fairness. This study examines the welfare and distributional implications of Indonesia’s 12 percent value-added tax policy, focusing on whether higher consumption taxation disproportionately affects lower- and middle-income households. The study adopts a distributional policy-analysis framework combining tax policy analysis with household consumption patterns and socioeconomic characteristics. Secondary data on household expenditure, consumption composition, and fiscal policy are used to assess the potential incidence of the VAT burden across income groups. The analysis distinguishes between essential and discretionary consumption to identify differences in effective tax exposure among households. The study further examines whether exemptions, exclusions, or compensatory fiscal measures can mitigate potentially regressive outcomes. Rather than assessing VAT solely in terms of revenue generation, the study evaluates the policy through the broader principles of vertical equity and welfare protection. The analysis suggests that the distributive consequences of VAT depend not only on the statutory rate but also on the composition of household consumption and the design of compensatory policies. The study contributes to the literature by framing VAT reform as an issue of fiscal justice and by highlighting the importance of distribution-sensitive tax design in Indonesia.]]>
