2027 VAT Target Reaches Rp1,126 Trillion, a Sign of Recovering Indonesian Purchasing Power?

The government is targeting Value Added Tax (VAT) and Luxury Goods Sales Tax (PPnBM) revenue of Rp1,126.1 trillion, or growth of 13.4% compared with the 2026 outlook, according to the Financial Note document quoted on Tuesday (18/8/2026). VAT and PPnBM are important indicators reflecting the strength of purchasing power, domestic demand and the dynamics of national economic activity, given their close link to household consumption, production, trade and imports.

VAT and PPnBM receipts grew by 24.6% in 2022, driven by a stronger economic recovery, rising public consumption and the implementation of tax reform through the Harmonisation of Tax Regulations Law, which strengthened the revenue base. The performance remained positive in 2023 with growth of 11.1%, supported by maintained domestic consumption and national economic activity, reflecting still-strong public purchasing power amid rising global economic uncertainty.

In 2024, VAT and PPnBM still grew by 8.5%. Although the pace was more moderate than the previous year, the performance was still underpinned by maintained domestic consumption as the main driver of the national economy. VAT and PPnBM receipts contracted by 4.4% in 2025 compared with the previous year, mainly due to higher restitution realisation towards the end of the year, which depressed net receipts even though economic activity and domestic consumption remained relatively well maintained.

Alongside improving national economic activity, VAT and PPnBM receipts are expected to strengthen again in 2026 with growth of 25.4% compared with 2025. This growth is supported by increased production, distribution, trade and consumption of goods and services, which form the main base for VAT and PPnBM collection. In addition, stronger tax administration and optimisation of tax data utilisation also support improved revenue performance.

Taking into account the still-strong outlook for domestic consumption, developing production and trade activity, and the sustainability of national economic transformation, the government will continue to optimise VAT and PPnBM receipts in 2027. These efforts will be carried out through strengthening tax administration, increasing the use of technology and integration of tax data, improving taxpayer compliance, and expanding the tax base adaptively in response to developments in business models and the digital economy.