<![CDATA[This research examines the impact of Value Added Tax (VAT) on consumer purchasing power and inflation in Indonesia, particularly after the increase in VAT rates from 10% to 11% in 2022 and the planned increase to 12% in 2025. The increase in VAT rates directly affects the rise in prices of goods and services, contributing to inflation with an estimated rise in the Consumer Price Index (CPI) of about 0.8% to 1%. This impact is more pronounced on secondary and tertiary goods, while essential goods exempt from VAT provide protection for low-income groups. The research shows that the increase in VAT suppresses consumer purchasing power, especially among low and middle-income groups, leading to changes in consumption patterns and potential declines in aggregate consumption. Mitigation policies, such as VAT exemption on essential goods and subsidies, need to be strengthened with more effective compensation mechanisms. This research emphasizes the importance of a balanced fiscal policy approach to maintain economic stability and public welfare amidst efforts to increase state revenues through a rise in VAT rates.]]>
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